I really hate posting about mortgage violations. There are hundreds of thousands of mortgage brokers making an honest living not only providing home buyers with good mortgages, but also teaching them the in’s and out’s of the mortgage process. With that being said, I don’t want this post to sound like I’m saying “Here you go, I told you so”, but I want to bring to your attention some of the violations that you see and how we at RateWindow are trying to fix them.

I found that the 5 most common mortgage violations at RISMedia was indicative of why we definitely need the real estate community to jump on the “Transparency Movement” bandwagon.  Transparent mortgage regulation is coming whether we like it or not. I believe the powerful real estate community demanding transparent mortgages would be much more effective than regulation. Below is a great example of a violation. I bring this violation up because it is so typical. Simply, it is a bait and switch.

Bad “good-faith” estimates. Good faith estimates are supposed to be documentation of mortgages and costs for buyers to compare and contrast one mortgage offer to another. However, some brokers write low-ball good faith estimates as a “bait and switch” by showing homeowners they’ll offer lower costs and mortgage terms, then later inserting higher interest rates, higher closing costs or mortgages that some homeowners can’t afford. CMAC sees 21 percent of this violation in its mortgage reviews.

Who needs to drive the transparent mortgage bandwagon?

The real estate agent directs a significant amount of the purchase mortgage business in this country which creates a tremendous opportunity to get in front of what is sure to become a highly regulated industry. Washington obviously feels a need to make sure we don’t have a similar meltdown in the future and they have the momentum to push that agenda forward. Equally powerful in my mind as Washington’s laws is for the real estate community to demand their mortgage professionals be totally transparent. Once the consumers hear the transparent voice of their real estate agents the consumers will then demand it. Once the consumers demand it, the mortgage professional better deliver or figure out another profession to try.

Again, don’t get mortgage violations, mixed up with all brokers are bad. That is hardly the case, and when you see the type of transparency that the consumer wants and needs, it should make sense. We are not trying to change the world. We just want the consumer to get an honest, trustworthy mortgage broker. It’s a start, tell me what you think.

The RateWindow CEO, Mark Warner, will be speaking at Inman this year. His panel’s topic is “Blowing Up the Black Box: How to Make Radical Transparency Work.” We’ve been working on mortgage transparency for a couples years now so I’ve read a lot of news/blogs about how professionals are trying to be transparent. One thing that catches my eye in most, is that along with the buzz word transparency, I also see words like revolutionary, radical, innovative. Being a web developer for over 10 years, I do realize that keyword buzz is important for promotion, and in most cases that is all these words are trying to do, create buzz. In my opinion, transparency is not radical nor revolutionary, especially when it comes to mortgages.

When I think of radical transparency I think of knowing everything about the person I’m dealing with. Have they been arrested, what’s their political views, whats their religion, who are their other clients, etc… That IS Radical transparency. RateWindow is not that.

Scenario:

You just found a home you like and what to buy it. For the next 30 days you are going to be involved with a lot of people. You need to trust them, but they don’t need to be radically transparent. Another keyword you hear all the time in mortgage is “NO HIDDEN FEES”. While I agree that there are absolutely no hidden fees in any mortgage transaction, there are bait and switch. When you close a loan the last thing you do is sign off on the closing statement. The last thing you want to see is a fee that you might, or might not have been told about on that sheet, because if you don’t sign it, you don’t close and will possibly lose the home.

Therefore, business level transparency is what I call it. For these 30 days I want complete business transparency with the person I’m dealing with. Below is what I want to know before closing day.

1. Flat Service Fee. I want to know exactly how much I will pay the mortgage broker in fees to get me my loan. Whether this is a flat fee of $3,000, or a percentage of the cost of the loan (1% of 300,000). This does not mean I want a “Discount broker” Flat service fees should go hand in hand with the amount of service I’m provided. I have no problem paying a higher fee for better service. I’m a true believer in you get what you pay for.
2. I want to see every rate. I don’t care if its 12% and 10 points… I want to know that I’m being shown everything. My life is not like your life, I might buy a house and live there for 2 years, or I might live in it for 20 years. In each case I will want either a higher or lower rate based on the amount I will spend over the life of the loan.

That’s not that radical is it? with only these two bits of information I am now more empowered to talk to my loan officer about MY loan. This is all it takes to raise the trust level in this business trasaction so I can rest assured I’m getting the best loan for me and my family.