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SECRETS
EXPOSED!
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Insights,
Opinions & Commentary
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| Banks,
Thrifts & Mortgage Lenders Expect HEL Surge |
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Banks
and thrifts are expecting to see a big jump in
Home Equity Lending (HEL) this year, according
to an annual real estate lending survey by
America's Community Bankers. The survey found
56% of the respondents expect loan production to
decline this year as the re-fi boom slows; by a
larger margin they anticipate consumers will
turn more to HEL's. As interest rates rise,
"people will use home equity loans to tap
into the equity in their homes," an ACB
executive said. A similar announcement was
issued in January by the Mortgage Bankers
Association as well ... at this point in the
interest rate cycles, we always see these
comments – No Big revelation.
Escrow companies (called Closing Agents in some
states), love this turn of events since their
workload becomes easier for their fee! Normally
for their usual full escrow/closing fee they:
1). order a preliminary title & tax report,
2). issue escrow instruction to both Buyer &
Seller, along with the added fun of issuing
multiple amendments and changes, plus the joy of
dealing with all the phone calls from both
parties - and a set of Realtors too, 3). they'll
order demand payoff statements from existing
property lien holders, and the need to follow up
with them until they arrive, 4). make themselves
available to have everyone sign the final escrow
and loan paperwork, 5). prepare closing HUD-1
& checks and distribute to two sets of
people.
As you'll now be hiring them to do your
increasing volume of HEL's, numbers 2 and 3
above, along with a large part of 4 and five
(all very time consuming activities for them),
they don't have to do for HEL's! But you can
bet, they'll still try and charge you their full
'standard' fees anyway. As you can see, what's
left for them to do on a HEL is hardly anything
- important yes - but surely not worth a full
fee to your borrowers.
As you face Section 32 worksheets and see how
'tight' many HEL's need to be to qualify under
the Section 32 restrictions, it might be good to
know you can and should negotiate what
escrow/closing agents try and charge you on
HEL's. You'll get more loans to qualify if their
fees are closer in line with their workload and
risk.
Discuss
this item on our Board
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| Q&A
- Outsourcing Mortgage Processing |
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What
does it mean to outsource loans? Outsourcing
is one of the fastest growing trends in the
business world because it transfers non-core
functions to specialized service providers,
thereby allowing a company to focus on its own
core strengths. For loan originators it means
sending loans to specialized processing
companies instead of using in-house services.
Why outsource? Some of the top reasons
for outsourcing include: reduce and control
operating costs, improve client satisfaction by
streamlining the loan process, improve focus on
getting loans instead of baby-sitting them, and
gain access to a specialized service.
Many have turned to outsource processing because
of on-going costs that may include rent,
equipment, salaries, benefits, and insurance; as
well as added expenses and frustrations
associated with hiring, firing, and training new
employees.
Today's technological advances mean that loans
can be serviced quickly anywhere through the use
of encrypted e-mail, fax, overnight delivery,
electronic signature, and various software
systems that give loan originators instant
access to loan status information.
How does it work? Outsourcing companies
strive for speed and accuracy while processing
loans. First the broker or loan originator will
be asked to fill out a basic working contract or
agreement. Most outsourcing companies are
independent contractors, and the agreement is
usually on a case-by-case basis, and is not for
a stipulated length of time or number of files.
Each processing company has different
expectations for their loan originators, but you
can expect that they will require the following
items to be furnished when the file is first
submitted: a completed 1003, GFE, TIL, credit
report, all company disclosures and signed
borrower's authorization. A processing company
should be clear regarding the loan originator's
role in the process, and will include a file
checklist to ensure they get what is needed to
process the loan.
Communication between the processor on a file
and the loan officer is very important for
efficient processing. Therefore outsource
companies have systems in place that will allow
loan officers to track their loans as they go
through. Processors are only permitted to
contact borrowers regarding needed items or
paperwork required to work on the loan.
Everything else rightfully falls under the
auspices of the loan originator.
Processing fees usually range from $400 to $500
per file, depending upon loan type or
complexity. These costs can either be passed on
to the borrower by inclusion on the HUD, or can
be paid for by the broker at the close of the
loan. And many outsourcing processing companies
don't charge if the loan doesn't close. However,
processing fees often do not include overnight
shipping charges, credit reports, etc.
What about security? The GLB Act has
brought the issues of security and
confidentiality into the limelight. Concerns
about compliance with the Act have many looking
at ways to safeguard client information. These
security laws extend to all groups associated
with the mortgage industry, including processing
companies. Before working with a new company,
check to make sure that they are aware of the
laws and have appropriate security safeguards in
place.
Discuss
this item on our Board
Looking For a Few Good Writers
If you know someone who might like to author a
short industry relevant article (approximately
500 words) for this monthly newsletter; please
contact us. We're looking to broaden our appeal
and expand this publication to include one or
more additional frequent contributors. It could
possibly even develop into a regular monthly or
bi-monthly column for them!
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