Reverse Mortgages a Target for Fraud

Though the FBI’s 2009 Mortgage Fraud Report, which shows that reverse mortgages are the main target for fraud, the NFCC is endorsing reverse mortgages.....Despite the fact that the FHA has had to become tougher on seniors with reverse mortgages, there has been a 10% cut in maximum borrowing amounts, and the growth of reverse mortgage scams, the NFCC has stated that “reverse mortgages are the.......

Two Members of Reverse Mortgage Fraud Ring Plead Guilty: Fraudsters Profited from FHA-Insured “Reverse” Loans Intended to Benefit Seniors....

Ag Exempt Properties

First Source Capital Mortgage has been providing loans on ag exempt properties since 1993.

• Ag Exempt with competitive long term fixed and adjustable rates

• Owner Occupied Properties

• Unique and flexible financing terms

• Rural resident, part-time and full-time farmer are eligible

• Existing homes with acreage in rural areas and smaller communities

Senate Tracking to Reform Mortgage Compensation

The Senate has approved approved sweeping legislation that will overhaul the mortgage industry if it stays on this path; Restoring American Financial Stability Act of 2010, S. 3172.

While most mortgage types hope for changes before the bill becomes law, expectations by some believe the final bill will go the President in early July, 2010, but, changes will take 12-24 months to implement.
There are several major and I will update this blog on the other points later, but KEY points that affect LO compensation are as follows -
  • Loan Compensation can not be based upon interest rate or product type
  • Loan Compensation can be based upon loan size (basis points)
  • Specific wording - “no loan originator shall receive from any person and no person shall pay to a loan originator, directly or indirectly, compensation that varies based on the terms of the loan (other than the amount of the principal).”
  • YSP and Overages will go away
  • Basis Points paid will be set for all loans originated for a period of time regardless of revenue generated
  • Companies would set basis point levels
  • Loan Officers can not be paid based upon terms of the transaction/loan type
  • Loan Officers can not be paid based upon volume levels or loan quality (there is some confusion about this aspect because another statement mentions incentives for volume allowed)
So, we've been told this was coming around the bend and it looks like the trains on a straight track for now.

To that end.....

Overview of CHM2 Program (Jumbo Rural Home/Land w/Ag Exempt)

Product Par Only Rate Max LTV

30 Fixed 7.000 80%

20 Fixed 6.625 80%

15 Fixed 6.250 80%

7/1 ARM 6.000 80%

10/1 ARM 6.375 80%

15/1 ARM 6.625 80%

• “A” credit and Full Doc

• Must have Agricultural income or potential for income

• Max LTV 80%

• Primary residence only

• PITI and DTI ratios should meet 28/36 guidelines

• Min FICO is 700 for all borrowers

• Dwelling value => 30% of appraised value

• Ag exemptions OK

• (New!) Escrows will be required on ALL loans

• Rates are good for loans <$2 million. Call for a specific quote for loans that are >$2


A 1.25% rate lock fee required to lock loan


GMAC/6% Seller Concessions/Owner's Title Policy

Interpretation of many aspects of the new GFE 2010 is still up for grabs and will ultimately be decided in a court of law. Thus, you can't really blame GMAC for how they are treating the owner's title policy as it relates to seller concessions.

As you know, or should know if you are a mortgage or real estate professional, the maximum seller concession is 6% of the sales price on an FHA loan.

GMAC has declared, for their purposes, that because the owners title policy is not a mandated seller fee it must be included in the 6% limit.

This change in their interpretation is, I'm sure, due to the way the owner's title policy is shown on the GFE 2010.

I'd recommend watching all fees that show on the GFE 2010 in comparison to the 6% calculation.

The 5 Ps: Picking the Right Employer

Edited on 5/4/2013. 

There are some really good companies to work for, and some really bad ones. I'm not sure if picking the right company to work for is an art or a science, but it takes paying attention and asking the right questions.

Due to the nature of a previous business model, a lot of people asked "what they should look for in picking the right company." That model was dependent upon people coming the conclusion to come to work for my company and I challenged them to drive the "5 Ps questions into their decisions.

Picking the right company boils down to what I call the 5 Ps; 

People, Products, Pay, Pricing, and Processes. 

You can throw in purpose, planning and praying, but I started using the 5Ps in 1994 when interviewing for a loan officer position and have stuck with that ever since. The other three should be part of our daily routine anyway.

The example herein is a mortgage loan officer/branch manager looking to change companies.

Note: My experience (not opinion) is that the order is important but not entirely weighed equally. 

  • what kind of people do you want to associate with? Know this now or the rest doesn't really matter.
  • ask the company about values - what is important to them? Does this align with your own values?
  • spend time with those in the company other than those recruiting you
  • consider the following behaviors in yourself and the company you are talking to -
    • Talk Straight
    • Create Transparency
    • Clarify Expectations
    • Practice Accountability
    • Listen First
    • Extend Trust: demonstrate a propensity to trust, but always do it appropriately based on the situation, risk and credibility of the people involved
  • the company itself; every company is made up of talent.
    • is the proper talent in place so you can do your part?
    • does the company have the proper financial strength?
      • how open and transparent is the company?
  • visit with talent (people) other than those recruiting you, were you able to meet with accounting, HR and secondary? Be aware of "dog-and-pony" - it's ok they put the sales pitch on you (and they should) but be sure it is real and not just a show.
  • what are the T.A.S.K.S of the individuals and company in general
    • Talent
    • Attitude
    • Skill
    • Knowledge
    • Style
  • Trust, but Verify (as Reagan would say).

  • this includes everything; from start to finish. Do they have the track record you need to get the results you want. While we can only hold ourselves accountable at the end of the day, insure now that the company can support what it takes for you to be the loan officer/branch manager you are capable of being
    • training
    • originating
    • processing
    • underwriting
    • closing
    • customer service
  • where is the processing, underwriting and closing functions performed
    • be careful of "promises" to bring it local in the future. It's ok they are promising, but look at the company's track record. If they aren't performing any of these functions separate from corporate now, they probably aren't going to in the future.
  • Is the company a mortgage banker or broker (not that one is necessarily better than the other, just be sure you REALLY know how the company is closing and selling loans)
    • ask these questions very specifically and thoroughly
    • when interviewing the company, insure you meet people with titles of underwriter, closer, shipper, insurer. Find out how their process work on the banker vs broker end.
  • verify all aspects of your business and theirs
    • can you work within their systems?
    • do their systems "compliment" your style
    • do they have systems that will let you get the job done
  • what about their technology?
    • is it up-to-date?
    • do they have dedicated personnel to keep the systems running properly?
    • what LOS system does the company use? Do they support the LO and branch and how much, if any?
  • what processes do they have for getting everything done?
    • is it in writing?
  • compliance
    • this is huge - not only is the compliance department there to protect the company, your NMLS license is also at stake; and not just now, but 10 years from now.
    • if something doesn't appear right and those recruiting seem on the edge, visit with members of the compliance department. 
    • social media - if you practice social media, does your strategies conflict with the companies?
  • Onboarding Process
    • how long does it take to get approved?
    • how does the company handle the transition from present employer to new?
    • how does the company handle the transition in case things don't work out and you need to leave?
    • once onboard, how do you and your team get up and running with new company?
    • who all is involved? (talk to these people also)

  • While the mortgage industry has become "generic," it is important to know who the company is selling their loans to.
  • Does the company have a good stable of lenders?
  • There's talk that because of the changes in compensation laws that many loan officers will want to "specialize" in certain products. Does the company have these specialty products or are they capable of bringing them on?
  • Are the products you (and your branch if applicable) need available.
  • Warehouse lines
    • what is company's present monthly funding?
    • what are the company's warehouse capacities?

There's no doubt this is the most prevailing topic the mortgage industry has ever faced and while the emphasis is very important, PAY should not be the deciding factor. The people and processes are way too important and can "make or break" loan fundings and personal bank depositts.
  • what is the compensation plan?
    • is it in writing?
  • is it real or a bait and switch?
    • can you verify it?
  • how often are you paid?
  • what is the process for being paid?
    • is it in writing?
Note...this along with pricing needs to be "real." Laws and regulations stipulate certain aspects of compensation must align with the industry as-a-whole. If the comp plan seems to be cutting some corners, it probably is and for a specific purpose; to get you to come to work.

Remember this.....If you have an NMLS license, your license number is on the line. Your career can not afford to take chances with a compensation plan that cuts corners now for a federal auditor to make an example of later.

I can't say enough about PROTECTING your license. Know that the company you work for is worthy of using your license because that's exactly what you are letting them do.

If the pay looks "too good to be true, it probably is." They're likely going to adjust the pricing on you later, after you are on board, you're in the middle of the summer and you can't afford to change companies.

  • be sure the pricing is real and not a teaser to get you on-board.
  • many good companies will not want to show you the pricing up-front. I don't agree. I'm a "lay the cards on the table" type guy. If the pay is too good, the pricing is likely not-so-good. Negotiating on the part of the LO/Branch Manager can back-fire with increased margins later.
  • many good companies will shy away from loan officers/managers that focus on this part of the equation - again, I don't entirely accept this practice. If someone will give me rate sheets upfront and on an ongoing basis, I'm able to trust-but-verify all along the way.
  • be aware of "bait-and-switch" pricing.
  • be aware that pricing engines can be manipulated to show you better pricing in the recruiting process.
In summary, your career should be important enough to you and the company you are considering moving to spend a great deal of time considering these 5Ps at a minimum. Ask for references and call other loan officers and branch managers that work for the company. See if you can locate some that have left; be sure you remember though, they have left, they could be unhappy about the industry or a particular person, but it's good to weigh all the facts and experiences.

There's a lot of opportunities, insure you've got your eyes, ears and hearts open.

To that end.........

HUD's Elimination of Correspondent Lending Approvals

HUD Mortgagee Letter 2010-20 increases the net worth requirements for FHA-approved mortgagees and eliminates FHA approval of loan correspondents.

Note that it eliminates the approval of loan correspondents but does not eliminate the correspondent type companies (brokers) from doing FHA loans.

The mortgage letter can be viewed at

Excessive Land Values

First Sources Country Home products are geared towards homes on medium to large acreage tracts. Depending upon the program, the land value can typically be up to 50-70% of the overall value of the property. There is a maximum home value on programs CHM1 and 3 of $269,807