by Morgan Brown

Mortgage Banker

Author website

I like to think of myself as an ethical person. Then again, I am sure that most people feel that way about themselves too. We all are victims to the Lake Wobegon effect at some point in our lives. But in general I obey all laws, pay my taxes, am a good father and husband, run an honest business and try to make my customers happy. So I am faced with an interesting dilemma that the current market has brought upon me. I don’t think my dilemma is unique; in fact I bet it is so commonplace that it is on the desk of a large percentage of loan originators at mortgage institutions all across the country. It is an important issue to discuss, so important that I originally planned on penning this post for my blog, but figured the traffic and exposure of Bloodhound would be a better platform for debate and discussion.

Here is the dilemma. I was given a referral to a woman who I do not know personally. She lives in Florida, is a substitute teacher and lives in a condominium with a waterfront view. She has a good credit and a decent rate, interest only loan right now — it does have a prepayment penalty. She is also at 90% with her current loan to the value of the property. Unfortunately she has a bit of a cash crunch right now and would really like to lower her mortgage payments.

There is no way that using traditional mortgage products can drop her payment any further. First, I know interest only loans are not traditional. Second, before you talk to me about 40 and 50 year terms remember she’s already in an interest only loan — there won’t be much change, certainly not when you factor paying off a prepayment penalty in to the new loan. The only loan that would dramatically lower her payments is a payment option, negatively amortizing loan. If she made the minimum payment she would drastically lower her monthly cash outflow. I’ve explained to her the negative amortization part of the loan, faxed Read more

by Brian Brady

Commercial Real Estate Finance Expert
Structured Debt and Equity
Licensed Real Estate Broker in AL, CA, and FL

Author website

In Southern California, many loan originators are licensed by the Department of Real Estate. Such licensing is unique to California. California was one of the first states to require licensing of loan originators and chose to require that they have a real estate salesperson’s license.

Some bright Realtors realized that they could earn an income from both functions: real estate brokerage and loan origination. In fact, business models were built that center on that unique ability. Utopia Mortgage and Real Estate offers an 80% commission split to agents for such dual agents. It’s not a bad deal for an agent. Represent 3-4 buyers a year, secure them financing, add 4-5 more refinances in the year and you’re a six figure agent!

The problem in the past was that HUD explicitly forbids real estate licensees to engage in loan origination if the lender/broker offers FHA loans. That hasn’t been an issue in California for 5-6 years.

Tracy Nicole posted an excellent article in the Members’ Only section of Active Rain entitled: Jack of All Trades, Master of None. Fact or Fiction? You need to be a registered member at Active Rain to see this article and comments. Get a free membership by clicking this link. The premise is that she opts for the dual function because it (a) gives her control of the transaction over the “so called professional” loan originators (b) it allows her to “drastically cut the mortgage fees” for her customers 90% of the time (paraphrased quote)

I asked the question “Why Can’t Banks Engage in Real Estate Brokerage ?” in a like members-only post at Active Rain. My rationale is that if the consumer benefits, as was presented by the commenters, than it is just too substantial to pass up. True, federal banks are exempt from state licensing laws and that’s unfair. However, pretend that we could force them to license in each state
Will the merging of real estate and mortgage functions benefit the consumer? Can the big banks be more efficient at Read more

by Brian Brady

Commercial Real Estate Finance Expert
Structured Debt and Equity
Licensed Real Estate Broker in AL, CA, and FL

Author website

Ardell over at Rain City Guide has been posting some good, consumer-friendly stuff about lending. It’s refreshing to see an agent work through the lending process.

In an earlier post, Ardell and I exchanged comments about hard money lending where she claimed ignorance; that couldn’t have been farther from the truth.

Ardell wrote a consumer post about pre-payment penalties. In the third and fourth paragraphs, Ardell explains the essence of private mortgage lending.

It really is that simple.

by Morgan Brown

Mortgage Banker

Author website

Brian Brady wrote a great series of articles on how to obtain the best mortgage loan by shopping for a mortgage originator first, and then the loan second. His brilliant advice is a bit counter-intuitive but dead on. If you are considering shopping for a mortgage by using the internet, keep his advice in mind as you read the rest of this post.

My company primarily uses internet leads for new business. Of our approximately $12 million a month in loan originations $4 million comes from repeat and referral business and the rest comes from new business originated by internet leads. We spend about $30,000 per month on internet leads and get about 4 to 1 on our marketing dollar. I like to think we’ve figured out how to win business while competing with other banks. We use the big boys like LowerMyBills.com; but have stayed away from LendingTree.com — we don’t want to have to pay the lead provider off the HUD at closing.

There are a lot of misconceptions about internet leads both from the consumer and the industry side. We’ll focus on consumers in this post. For more in-depth information on the subject please read my Zillow Real Estate Guide article on 6 things you should know before shopping for an interest rate online. To summarize here the 6 things:

1. Plan on getting a lot more than 4 calls from the 4 lenders that are supposed to compete for your business — get ready for a ton of calls.
2. Plan on drinking from the mortgage information “fire hose” while different lenders pitch their products and expertise.
3. Be prepared to spend some serious time on the phone.
4. Don’t just go for the best up-front offer, keep some contingency offers in your back pocket.
5. If an offer is too good to be true, it probably is.
6. Know who you are working with.

But even before you read these 6 things, read Brian Brady’s post. When you shop online for an interest rate and fee quote INSTEAD of shopping for the mortgage professional first, you are opening up yourself to be the victim of bait and switch tactics. Think Read more

by Jeff Brown

Real Estate Investments Broker

Author website

It’s shameful the way I used to answer questions from prospects or clients. The excuse of age is available, as I was only about 27 or so. But even youth, or having just transitioned from homes to investments doesn’t wash as an excuse for my pitiful performance back then. It’s truly a blessing there were no hidden cameras or recorders in the office back then.

Clients would ask me if the rents in the area would tend to rise during the holding period. And I’d answer yes. The problem? Most folks asking questions want the answer, of course. But what they really want is the ‘why’ or ‘how’ behind your answer. Back then it irritated me no end that they wouldn’t just accept my answer as if I was quoting from the missing third tablet Moses forgot on the mountain. 🙂 I knew the answer. Why couldn’t they just take my word for it? What a moron I was. I could have been more full of myself back then, but I’m not sure how.

That’s about the time I was blessed by the teachings and example of Chuck Chatham. As far as I’m concerned Mr. Chatham was absolutely the best teacher and practitioner of real estate counseling. As the title of his seminar promised, The Art of Real Estate Counseling, (also the title of his book) he was indeed a master artist. One the subjects near and dear to his heart was how we, as professionals, dealt with questions from our clients, or those pondering becoming a client. He was especially sensitive to young upstarts like me and a few others in his seminar one day.

You first have to imagine a smallish older guy with what appears to be several centuries of experience. He literally oozed authority. I remember his face as having an eagle’s beak nose, and a patrician like stare, that when focused on you, was both chilling and assuring at the same time. Figure that one out.

Anyway, he’d been talking with some of us whipper-snappers during breaks, and was not happy at either our attitude or demeanor. Don’t get Read more

by Brian Brady

Commercial Real Estate Finance Expert
Structured Debt and Equity
Licensed Real Estate Broker in AL, CA, and FL

Author website

Brian Brady of World Wide Credit Corporation will be offering a free conference call and presentation:

“How to be a Hard Money Loan Broker “

Tuesday, April 24, 2007

4:00PM Pacific Daylight Time (7:00 PM EDT)

SIGN UP IN THE COMMENTS SECTION (8 spots available) . Make sure that your e-mail is correct when leaving a reply in the comments section. We will be using Go To Meeting technology. I will e-mail you the conference call phone number and link on Monday evening.
Topics Covered will be:

1- What is “Hard Money” ?

2- Who are these new “hard money lenders” ?

3- What is trust deed broking?

4- How do I find investors for private mortgages?

5- What is a California mortgage pool ?

6- How do I price my loans?

7- How do I market my new private mortgage product line?