HUD has extended the deadline for correspondent lenders (mortgage brokers) to provided their audited financials.

The big problem is that the extension period is useless. It’s a 30 day extension.

Since HUD has a proposed rule change in the works that will eliminate the approval for Loan Correspondents (Brokers) There is almost a 100% chance that  the financial audits will not be necessary.

Financial Audits for HUD are expensive and time consuming. They cost thousands of dollars and must be completed by a CPA.

Doesn’t any one at HUD know that it is tax season. Extending a deadline from March 31, 2010 to April 30, 2010 for work that a CPA has to complete will not help the Mortgage Broker  Companies one bit.

They are still going to have to pay to have the audits completed.

I can hear the call to the broker’s CPA – Hi Bob, Great news! HUD has extended the deadline to April 30 for our financials. Since they are preparing to eliminate the requirement you might not have to do them for me this year.

Bob laughs uncontrollably for 10 minutes and then tell the Broker that audits take 60 – 120 days to complete and since HUD as of today still says you have to have them you will have to pay for one even though HUD has said that the Audit will more than likely be unnecessary.

The NAMB brain trust was in DC last month. Did anyone at HUD bring up this extension idea with them for input? Does anyone at HUD know a CPA?  Does anyone at HUD know that it is tax season? Does anyone at HUD care?

Net Branch – HUD – FHA

I always welcome comments, questions, and subscribers!

If you would  like to know more about our net branch partner program visit our Frequently Asked Questions page.

The Texas Department of Savings and Mortgage Lending issued a statement about the departments new rules for considering information in a loan officers credit report as part of the application process.

The department could deny a loan officer license if you have any of the following on your credit report.

• Bankruptcies filed within the last 10 years;
• Current outstanding judgments (except judgments solely as a result of medical expenses);
• Current outstanding tax liens or other government liens;
• History of and current collection accounts;
• Foreclosures within the past three years;
• Three or more accounts more than 90 days past due;
• Multiple Social Security Numbers attached to the individual’s name;
• Consumer provided comments;
• No credit history for the individual;
• Credit items the individual is appealing, if noted in the report; and
• Outstanding child support.

According to the memo credit scores will not be part of the decision but the department “may look at systemic, long-term financial irresponsibility as a reason to further investigate the information received before a final licensing decision is made. No single item listed above will serve as grounds for ineligibility, but several will cause further investigation and each decision will be made on a case by case basis.”

To read the memo CLICK HERE and read “Credit Check Processing through the NMLS – February 2010″

I always welcome comments, questions, and subscribers!

If you would  like to know more about our net branch partner program visit our Frequently Asked Questions page.

Texas Mortgage Net Branch Opportunity

Net Branch Managers should full understand the new rules and how they may change the way you operate your branch and how you hire new loan officers.

Many loan originators under their current state banking laws do not need to be licensed. Some states have only required loan officers who are mortgage brokers to be individually license while loan officer working for mortgage lenders were exempt from individual licensing.

With the new NMLS everyone – brokers and lenders will be required to be individually licensed. If you have been originating in more than one state you will have to have a loan officers license for each state and your office will also have to be licensed to operate in each state.

If you are hiring new loan officers for your branch you need to review the new laws to make sure that the prospective originator will qualify under the new rules.

As a net branch manager your compliance department at your national headquarters should also be able to help you with these issues. That is one of the benefits to being part of a national company. You have a full service compliance department to assist you.

Do not wait for the new laws to go into effect before you understand how they could change the way to operate your mortgage branch.

Click Here to visit the NMLS website to look up the new requirements for your state.

I always welcome comments, questions, and subscribers!

If you would  like to know more about our net branch partner program visit our Frequently Asked Questions page.

Mortgage Net Branch Licensing Information

There is now a new 4 page GFE (Good Faith Estimate) and new disclosure rules to go with it. The new GFE has you disclosing the figures several different way to (in theory) help the borrower better understand the transaction.

The initial fees that you disclose are now locked in and you cannot change them. Meaning that if you disclose 2% fees on a $200,000 loan ($4,000) and the loan amount changes you are tied into the dollar amount that you disclosed not the percentage.  There is a very small margin of error on some of the fees, but for the most part they are locked in.

The initial fees you itemize on your Good Faith Estimate now must carry over to your HUD-I closing statement.

How you disclose YSP has completely changed. If you are closing the loan as a mortgage broker you will show the YSP as a credit to the borrower, then you will have the borrower sign a mortgage broker agreement  to pay you the YSP.

The YSP like other costs on the GFE cannot change later in the transaction without completely re-disclosing the loan.

There is some ongoing  discussion about how the YSP is disclosed. Bottom line if you are a broker the old method used in many state allowing you to state the YSP as a percentage range (o% – 3%)  and not counting it in the closing costs is no longer legal.

HUD has published a new Settlement Booklet that you must provide to the borrower(s) with in 3 days of the application date .  It covers both the new GFE and the new HUD-I statement. I have provided a link  to the new document.
Settlement Booklet

For branch managers and  loan officers the changing rules continue to make it more difficult to earn a living. The opportunity is in learning work within the new rules. Someone will close that next loan – will it be you!

I always welcome comments and subscribers!

If you would  like to know more about our net branch partner program visit our Frequently Asked Questions page.
http://www.netoriginator.com/NetBranchFaq.htm

mortgage net branch managers in 2010.

If you are consider joining a mortgage company that offers a net branch opportunity you should be considering these changes before you decide on which company to join.

Big Net Worth Change for Net Branch Mortgage Companies

One of the most important is the new net worth requirements set by HUD that will  begin this year. The old rule required a company to have an audited net worth of $250,000. The new rule initially bumps the net worth requirements to $1,000,000.  Estimates are that this change will eliminate close to 25% of the mortgage companies that hold a lenders license with HUD because the cannot meet the new requirement.

The big question is which companies will be gone. You should ask questions about the financial soundness of any company you are considering joining. What is their net worth? Can they meet the new HUD requirements?

To make this even tougher, the $1,000,000 net worth threshold is only the first step. With in 3 years the minimum  net worth required to be a HUD approved lender will be $2,500,000.   That is a 1000% increase over current requirements.

Estimates are that close to 70% of current HUD approved lenders will not be able to meet the final net worth requirement.

Changing mortgage companies is a big move for any branch office. It cost time and money to make a move.  Do your homework on a company before you decide.

I always welcome comments and subscribers!

If you would  like to know more about our net branch partner program visit our Frequently Asked Questions page.
http://www.netoriginator.com/NetBranchFaq.htm

Mortgage Net Branch Opportunity

Setting up a net branch means that you are applying to be hired by a company as a manager.

As small independent  shops are are forced to close or merge with larger operations and FHA becomes more important you will see it become harder and harder to join a net branch mortgage company.

As companies consolidate more small shop operators and top loan originators will begin to migrate to larger companies. The majority of the larger mortgage companies are net branch operations. This will force those companies become more selective when deciding who to hire. In previous years it was a managers choice.  Companies were easy to join and managers could pick and choose companies. I think that is getting ready to change.

This post will give a perspective branch manager some tips on getting approved. We will discuss what a mortgage company looks for and how to present your self in the best possible way to increase your chances of approval.

First – what do companies look for in a net branch manager?

1. Origination Experience – Most companies want a minimum of 2-3 years loan origination experience.
2. Industry References – Your reputation with peers is important.
3. Management Experience – Previous mortgage branch management experience is preferred.
4. Credit – Many companies have set a minimum credit score requirement.
5. Background – Driving, criminal record searches are mandatory at most companies.
6. Plan – Have a written business plan.
7. Financial prepared – Have least 2 months operating expenses.

Second – How to present yourself.

1. Resume – you should have an updated resume that outlines your mortgage and management experience – There are a number of ways to organize your resume. All of them are acceptable as long as you highlight your origination and management experience. If you do not have mortgage management experience list any management experience that you have in another field.
2. References – The more the better. Make sure that the contact information is up to date and that the references you list expect the call.  Lack of response from references or bad contact information is a negative.
3. Credit – Credit will become a bigger concern. If your credit is good state that in your cover letter. If you have previous credit issues you should include a separate letter addressing the issue. KISS – Keep It Short and Simple.  If the issue is behind you use a few sentences explaining why it no longer an issue.
4. Background – If you have a good driving record and no blemishes on your record state it in your cover letter. If you do have previous issues use the same format given for credit explanations. Remember KISS!
5. Business Plan – You do not need to write “War and Peace” with spreadsheets. One page outlining your first six months of operation will work. The key is to not over sell what you will do.  The last thing a company want to see is someone with limited origination experience and little or no management experience stating that they will have 15 loan officers originating multi-state business in the first 3 months ( I get those calls).
6. Financially Prepared – Know your budget. what will it take to operate your branch every month. Rent, utilities, phone, advertising, branch fees,  etc.  Most companies will require a prospective branch manager to demonstrate that they have a minimum of 2-4 months in reserves to operate their branch.
7. Production History – You should be prepared to provide proof of income for the last 2 full years and Y.T.D. – How many units have you closed a month for the last 6 months? What is your average loan amount? What is your loan type mix – purchases vs refinances?
8. Source of business – Do you buy leads? Do you work with real estate agents? Explain how you source your business.

I hope this information helps give you a better idea of what a company will want to know and what you should be prepared to provide when you are considering applying for a net branch manage position.

Feel free to post any questions or comments.

Taylor, Bean and Whitaker -12th largest mortgage lender loses FHA approval.

Taylor, Bean, and Whitaker was one the country’s top wholesale lenders serving 100’s of small mortgage shops across the country.

TB&W has 30 days to appeal the suspension but few have won an appeal and the blow will make it almost impossible for the company to fully recover as a major player.

At the core of the move was some reporting irregularities.

FHA Commissioner David Stevens said, “TBW failed to provide FHA with financial records that help us to protect the integrity of our insurance fund and our ability to continue a 75-year track record of promoting, preserving and protecting the American Dream. We were also troubled that the Company not only failed to disclose it was a target of a multi-state examination and a separate action by the Commonwealth of Kentucky, but then falsely certified that it had not been sanctioned by any state. FHA won’t tolerate irresponsible lending practices.”

although many would like to think that the mortgage crash was only related to the sub prime world this action show that it was more than sub prime and that the problems are not over like any would like us to believe.

“Today, we suspend one company but there is a very clear message that should be heard throughout the FHA lending world – operate within our standards or we won’t do business with you,” said HUD Secretary Shaun Donovan.

If you are working for an FHA lender or broker pay attention to the little things.

Is your company making loans that other will not make?

Are you seeing lax disclosure policies and followup?

This story started earlier today with the Feds serving TB&W and Colonial Bank with warrants.

See story.

Also see the official press release from HUD
http://www.hud.gov/news/release.cfm?content=pr09-145.cfm&CFID=19550507&CFTOKEN=91094375

If you are brokering to TB&W or your company has a correspondent relationship with them you should be aware of the recent activity at their corporate offices in Ocala, Florida and at their primary warehouse lender  Colonial Bank’s office in Orlando, FL.

The Fed’s served both companies with search warrants yesterday.

Why should you be concerned?

TB&W was in the process of leading a group of investors that was planning on helping Colonial with a cash infusion of $300 million that would in turn help the bank become eligible for a $550 million TARP bail out.

That deal fell apart last week and Colonial announced that the bank might not be able to continue with out the assistance.

If Colonial is unable to fund TB&W’s closings your loans will not fund.

If your company is doing business with TB&W and you have active loans in their pipeline you should be watching this situation hourly. You should have a back up plan for your pipeline.

I have noticed that there are several “side businesses” trying to recruit loan officers.

By “side businesses” I mean companies that offer services like credit repair or loan modification.

My in-box is full of offers and I see recruiting ads everywhere.

These companies are trying leverage the loan officers ability to connect with a group of clients that could also be prospects for their business. This is common business practice and you can find this in many industries.

It does raises a few real important questions.

1. What is the best use of your time.

Should loan officers invest their time building their own origination business or become a referral source to help someone else build their business?

Should you spend your time finding credit repair leads or another type of mortgage or real estate related service for someone else instead of investing your time in developing a referral network that delivers you an ongoing stream of business?

Credit repair and loan modification are not bad things (although everyone has heard the stories of companies that charged for services and did not deliver much in the way of results) and these services could help some people in the long run.

But I think that the question is really about time, focus, and reward.

How much time do you have to spend, is the activity diluting your focus, and how much of a reward will you receive.

Based on time and reward I think anyone would be better off focusing on their core services. You will profit more by focusing on the activities that help your core business instead of diluting your focus by spending time and effort on an activity that does not generate revenue for your core business.

Ask your self the question. Am I a loan officer or a loan modification representative? If you have to decide – which one are you?

What ever your answer is that is what you should focus on. Any one who tries to be all things to all people will fail at all of them.

2. Is this legal?
If you originate FHA loans – in today’s environment almost everyone does – you could be in violation of HUD employment rules.

HUD says it is OK for a mortgage company’s employees to have other employment but it cannot be with another mortgage company, a real estate company or any other finance related company. Here is the exact wording from the HUD handbook “They may have other employment including self employment. However, such outside employment may not be in mortgage lending, real estate, or a related field.” You can find this in Chapter 2, Item 2-9, G (Full Time, Part Time and Outside Employment).

I think credit repair and loan modification would fit HUD’s definition of “a related field”.

Credit repair has been around for a log time but for most of the time that the industry has existed FHA played a minor role and most mortgage companies did not consider HUD rules for many of their practices and policies. That has changed. FHA now is the primary product at most mortgage companies.

Loan modification is a relatively new part of our industry. I do not think many companies have gotten that far yet to ask the question of their compliance department – “Does this violate the HUD employment rule?”

The HUD rules on employment are simple. It is only a few sentences and leave little room for misinterpretation. As an employee of a HUD approved mortgage company you cannot work for another mortgage company, real estate company, or any company in a related field.

If you are employed as a  loan officer and you  are also acting as a credit repair, and/or  loan modification agent to earn additional income you should question your compliance department to make sure you have their OK.

Get it in writing.

Lee Walsh

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

In most cases the answer is no.

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

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

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

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

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

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

** update 11/01/2009 – there has been a major change in the HUD rules sinc ethis article was published. The broker approval process will be discontinued and the net worth requirements for a lender  is being increased to $1,000,000.

This will make it more difficult to become a HUD lender and the approval process to do 3rd party origination will become tougher.

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

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

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

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

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

Nothing is free. A branch has to bear some of the cost for these services but instead of one or two offices bearing all of the costs they are spread out through out the entire branch network.  Each branch has far less cost for these services than they would if they were operating as a small independent company.

With a net branch mortgage company the branch managers can spend their time on the activities that generate income.

I hope you found this information helpful.

I always welcome comments and subscribers!