Question on using a non-local mortgage broker

[Mama]

Sorry, not exactly "Seattle RE related" but there's a number of people here that are knowledgeable about real estate so I'm hoping to get a good answer.

We recently moved long distance and I haven't gotten many leads on brokers at our new location. But I did work with a broker in Seattle that I liked. It was a lot of "not the right house/not the right price" type of journey. I just learned that he can originate a loan for our new state.

What are the cons of this approach? I like the broker so I think I'd rather work with him than someone new, but what are the risks? I was under the impression that it's customary for the mortgage broker to be physically present at signing? Are there state specific laws that the broker needs to be aware of? Any possible issues with escrow? I've never bought a house before so this makes me nervous but I read Rhonda's article on RCG on "shop the broker not the rate" so I thought I'd research some.




Any advice/insight appreciated

[jillayne]

Hi Mama,

Good for you for asking the question and doing your homework. A couple of red flags go up for me.

First, it seems extremely unlikely that your broker "just got" approved in your state at the "same time" that you needed a broker in that state.

I believe there's a greater than 50% chance that your broker is lying. Typically what happens when a former client moves out of state, and that broker wants to earn a fee for originating your loan, that broker will find some other company who is licensed in your state, and approach him/her with the following deal:

If I originate this loan, can we close it under your license number? If you do this for me, I will split my fee with you.

Fee splitting with an unlicesed LO is not allowed in most all states, BUT it's done all the time under the table by LOs.

In the above scenario you will likely end up paying higher fees because your guy will need to make a certain percentage, and then will mark up the fees to cover the pay off to the real licensed LO.

Here is how you can do your homework.

1) Go to that loan originator/broker's website and find the page where the company discloses licensing information. Confirm that the COMPANY is licensed in your state.

You may think: that's easy. I proved Jillayne's 50% theory wrong! Ha! But we need to go one step further. Most states now have some sort of licensing provision for loan originators.

Find your state's website that regulates loan originators. If you can't find it, email me directly at jillayne at gmail and I will find it for you.

You need to check that your loan originator is indeed licensed.

There are several large companies out there with licenses in all 50 states....but not all their LOs are licensed in all 50 states.

Loan originator licensing takes a LONG TIME to do in each state. I find it unbelievable that this person "just found out" that he's licensed. Instead, he/she would have been preparing for this for several months. It's a strategic business decision to pursue multiple state licenses. It takes time and money and that's why some LOs try to circumvent the state laws.

Best of luck to you.

[Mama]

jillayne, thank you so much for your detailed answer but I'm afraid my inexperience here gave misleading information

1. The person is not really a mortgage broker, they are a loan originator (they offer mortgages but work on behalf of a big bank -- TARP-sized ). The bank does have local officers in our new state, I just don't know any of them (can't get a personal opinion from people I know). I looked on the licencing site -- I live in MA now, and the list only contains banks/institutions, no individual names -- my assumption is then that any officer is OK?
FWIW the person didn't "just find out" -- I asked them if they know someone in the local office that they'd recommend and he said, "oh, i can do it"

2. I imagine if the fees were jacked it would be fairly obvious if I put their TILA/GFE side by side with someone else's no? I mean, if there is a surcharge, it would have to be somewhere on these forms?

3. Other downsides than the $? Do I need them sitting next to me at closing? Is it likely that they'll give me closing estimates that are way off?

Sorry if the question is naive or poorly worded -- this would be our first purchase so I find the process fairly overwhelming.

[Rhonda P]

Mama, if I'm understanding you correctly, you're working with a mortgage originator at a large-TARPed bank (what a visual!) who you've worked successfully before?

If you trust this person, it may be safe to work with them. Even when I was able to close out of State (pre-licensing); I would more often than not, recommend the client find a mortgage originator in their state. Part of the reason was so that they would have access to local appraisers. However, considering the new changes to how appraisals are ordered (thanks to WaMU); this doesn't matter since most mortgage companies will no longer be able to select who their appraiser is. Big banks are all ready using AMC's (that they have ownership interest in) and the quality of appraisals are suffering.

Personally, I prefer working with people where I can see the whites of their eyes if needed.

I don't know what your personal financial scenario is...unless you have 740 credit scores and 20% down, I'd make sure that who ever you work with is FHA approved.

Good luck!

[Mama]

Thanks Rhonda, yes, you understand the situation correctly.

I "trust" the person somewhat, I suppose (I've seen them in person and prequalified with them twice so they know my situation). But I don't _really trust_ anyone in this process, because in the end it's my money and my debt, hence seeking second and third opinion on the wisdom of such move. Thanks a lot for your input -- I really appreciate it.