But will the new collaborative really change marketplace realities? You’d like to hope that the answer is yes but traditions can be hard to overcome.

The group says its members generate mortgages worth $520 million annually and describes itself this way:

“For the first time ever,” says the Collaborative, “American consumers seeking mortgages will now have the option of using lenders that are certified as “safe,– “fair– and free of predatory lending, under a 21-member national network known as the nonprofit “Fair Mortgage Collaborative– (FMC), the members of which are committed to providing homeowners and homebuyers access to mortgages at a fair rate of compensation. The major effort supported by the Ford Foundation is the first national campaign of its kind aiming to restore consumer confidence in mortgage lending in the wake of the ongoing mortgage foreclosure crisis fueled in large part by predatory lending abuses.”

Standards

Okay, so how do we know that a lender is safe, or fair or not predatory? The Coalition has set up five standards:

___ FMC Lender Works for Customer, Not Other Way Around;

___ No Steering;

___ Absolutely No Predatory Loans;

___ Non-Standard Loans Require Clear and Compensating Customer Benefit; and

___ FMC Keeps Rules and Standards Current for New Loan Types.

Missing Lenders

The group is supported by an impressive list of housing foundations and related organizations, but what’s missing are the big banks, S&Ls, mortgage brokers and mortgage bankers who provide the overwhelming majority of the nation’s home loans.

Most lenders have traditionally opposed the concept of working for borrowers. No less important, federal rules are entirely devoid of any requirement to get the best possible deal for the borrower, what’s generally known as a fiduciary obligation.

“Fiduciary” is simply a fancy term that means when you employ someone they will put your interests first and not their own. Doctors, dentists, lawyers, buyer brokers and listing brokers all have an obligation to do what’s best for their patients and clients and if they don’t they can be sued. Lenders and loan officers under federal rules — the rules that count — have no such obligation.

Mortgage Brokers

“Some have proposed,– said Harry Dinham in 2007, then president of the National Association of Mortgage Brokers, “that a fiduciary duty standard should be implemented and mortgage originators and their loan officers should act in the ?best interests’ of the consumer. NAMB remains opposed to any proposed law, regulation or other measure that attempts to impose a fiduciary duty, in any fashion, upon a mortgage broker or any other originator.

“Simply put, a mortgage broker should not, and cannot, owe a fiduciary duty to a borrower. The consumer is the decision maker, not the mortgage broker,– says Dinham.

And where do consumers get their information? Upon whom do they rely for product options? How can a lender advertise the “best rates” or the “lowest” rates without being obligated to hold down the borrower’s costs? Would any sensible person go to a lender who advertised the highest rates?

Mortgage Bankers

John Robbins, a former chairman of the Mortgage Bankers Association, said during June 2007 congressional testimony that “notably, MBA does not believe that a disclosure of function and fees is warranted for mortgage lenders. Unlike a broker whose role may be uncertain — agent or loan provider — a lender’s role is clear. A lender underwrites, approves and funds the loan. The lender does not hold himself out as an agent of the borrower. While a lender must serve its customers fairly, and the industry has done much to assure high professional standards, a lender owes a duty to its shareholders and investors. A borrower knows a lender offers its own products and does not offer to shop for borrowers.–

The problem, of course, that in the everyday world of borrowing consumers have no idea who is or who is not a mortgage broker or a mortgage banker. What consumers do know is that they need assistance with what’s likely to be their largest purchase, a mortgage — and not a house. For example, imagine that you buy a home for $200,000. You get a $190,000 mortgage at 6 percent over 30 years. The total interest cost over the life of the loan will be $220,094.

Changing Industry Standards

Interestingly, I suspect that a number of mortgage brokers, mortgage bankers, community banks, credit unions and thrifts will be willing to be certified under the terms of the Fair Market Collaborative. Why? Because they realize that the best way to build “relationships” with people is not to drive them into bankruptcy. Just look at the lenders who refused to originate option ARMs, interest-only mortgages and have never accepted stated-income loan applications.

But in addition, more is needed. Federal standards must be changed to assure than when you get a mortgage and rely on a loan officer for advice that the individual who provides information is absolutely obligated to get you the best possible rates and terms.

Certified Lenders

Lenders can be certified by the Collaborative and hopefully borrowers will be educated to only deal with lenders who have agreed to the group’s standards. Those who have so far been certified to offer “safe and fair” mortgages include:

__ The Boeing Employees’ Credit Union (BECU)

___ Prime Alliance Solutions

___ The Federation of Appalachian Housing Enterprises & Just Choice Lending

___ The Mortgage Grader

___ The National Council of La Raza Homeownership Network and Direct Lending Family

___ The National Federation of Community Development Credit Unions (The Mortgage Center)

___ Neighborhood Housing Servics of America and Just Price Solutions

Can You Trust Your Lender? is a post from: OurBroker.com -- Refinance, Home Mortgage Loans & Rates, Home Equity Loan

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___ “The average contract interest rate for 30-year fixed-rate mortgages increased to 5.25 percent from 4.81 percent, with points decreasing to 1.02 from 1.28 (including the origination fee) for 80 percent loan-to-value (LTV) ratio loans. The 44 basis point increase in the 30-year rate was the largest since a 48 basis point increase in October 2008.”

___ “The average contract interest rate for 15-year fixed-rate mortgages increased to 4.8 percent from 4.44 percent, with points decreasing to 1.10 from 1.16 (including the origination fee) for 80 percent LTV loans.”

___ “The average contract interest rate for one-year ARMs increased to 6.61 percent from 6.55 percent, with points increasing to 0.15 from 0.12 (including the origination fee) for 80 percent LTV loans.”

Interest Rate Rise Examined

If you look at these numbers carefully you can see three things: First, rates for the week are plaining on the increase. Second, what happens in a week is not a trend. Third, the rate increase is not as steep as it seems.

Let’s take a look at 30-year fixed rate loans.

We went from 4.81 percent with 1.28 percent to 5.25 percent with 1.02 points. A point is equal to 1 percent of the mortgage amount so for a $100,000 the cost of one point would be $1,000.

Notice that interest rates went up but points went down.

Apples To Apples

To compare apples to apples, let’s convert those points into interest rates. The usual equation is that one points equals one-eighth of a percent (.125) over 30-years. (Most mortgages, of course, do not last 30 years, which means the effective interest rate for one point is higher than .125 percent.)

To start we have 4.81 percent plus 1.28 points. Convert the points (1.28 x .125) to interest and we get .16 percent. Add 4.81 percent and .16 for a par rate of 4.97 percent. (Par is the interest rate with no points.)

The new rate is 5.25 percent plus 1.02 points. We convert the points (1.02 percent x .125) to interest and we get .1275 percent. Combine the interest rate (5.25 percent) plus the value for points (.1275 percent) and the new rate at par is 5.3775.

The Real Rate

In reality, we went from 4.97 percent to 5.3775 percent at par for fixed-rate loans. That’s a difference of .4074 percent — in a week.

Don’t panic — let’s see what happens in a few weeks. But we could be seeing the end of historically-low rates in exchange for rates that are close to historically low. That still isn’t bad.

Interest Rates Rise Suddenly, Say Mortgage Bankers is a post from: OurBroker.com -- Refinance, Home Mortgage Loans & Rates, Home Equity Loan

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As a practical matter, in many cases mortgage bankers act as mortgage brokers — and so do commercial banks, S&Ls, thrifts and other “lenders.”

What’s The Difference Between Mortgage Brokers And Mortgage Bankers? is a post from: OurBroker.com -- Refinance, Home Mortgage Loans & Rates, Home Equity Loan

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