MCP Help Blog

Today’s big mortgage news is from Florida (what else is new!?). The Miami Herald discovered that not only are the majority of the state’s mortgage professionals unlicensed, but over 5,000 of them were convicted felons! Even worse, this practice is perfectly legal. How can this be?

The devil is in the details, and while it’s illegal in Florida and most other states for mortgage brokers to have a criminal record, their subordinates (generally referred to as loan officers, loan originators, account executives, or mortgage finance officers) are allowed to. The idea is that the broker is held responsible for the ethics and practices of his / her employees. Unfortunately, this provides a nice little loophole for those who were stripped of broker’s licenses because of their shady lending practices. They just become loan originators and work for another broker. And there are brokers out there who don’t check the backgrounds of their employees and don’t police their lending sufficiently.

So, how does a borrower make sure a lender is reputable? First, know that the odds of getting a fair deal are in your favor. Real estate expert Robert Bruss, in an article about mortgage lending practices, acknowledges that “most mortgage lenders are honest.” So does Realty Times, stating that while there are a few “bad apples” the “vast majority” of lenders are honest.

Second, learn what your state’s requirements are. Some are quite stringent, requiring background checks, education minimums, and passing exams before a loan officer can be licensed. Other states have no requirements at all. Here is a link to state requirements for loan officers.

Third, check your lender’s status in your state. Here is a link for states which have lender databases online. You can generally find out if its licensing requirements are in order and if there are pending actions or investigations.

Fourth, check out several lenders before committing to one. Especially for subprime or bad credit borrowers, getting quotes from several mortgage loan companies is the best way to make sure you are being offered a fair deal.

Finally, really read your disclosures and remember that whatever is in writing trumps anything you are told by a loan officer or broker. The most often reported abuse of borrowers occurs when the terms disclosed upfront are changed at closing. If the interest rate, fees, or terms such as the addition of a prepayment penalty have changed at closing and weren’t discussed with you beforehand, don’t sign the documents until the misunderstanding is cleared up and you either receive a satisfactory explanation or get the loan you expected.

When you refinance your primary residence, you have three days to rescind or back out of the loan–use that time to make sure your loan is what you expected. When purchasing property, insist on getting copies of your documents a day or two before closing. That way you can really go through them and resolve any questions in a less pressure-filled atmosphere.

A lender you trust and work well with is as priceless as a good mechanic or hair stylist. And the amount of money involved makes it serious business. A little legwork (or mouse-work) upfront can save you money, smooth out the mortgage financing process, and ease your mind.