How loan officers get paid
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Rhonda Porter on April 25, 2007 at 8:59 pm
Thanks, Lynlee! You really hit it home. This is what I was trying to convey in my post, but as Morgan mentioned on his blog, Blown Mortgage, I “sugar coated” it. This was my experience when I was in escrow as well.
There is an attitude of some in the industry to “not leave anything” on the table. And it can come from the buyer feeling as if this negotiated “up to” closing costs was not properly spent on…yet if it just goes to “origination” and not to buying down the rate (which in my scenario, at 1%, it probably would have bought the rate down from 0.125% to 0.25%), it’s wasted on the LO.
I’m not sure if this is a question for you or not…but since the p&s is left up for interpertation… how could an agent prepare the addendum so that the LO does not get the “crumbs” of the closing costs? I’m thinking it might have to have “allowable costs” with actual figures…
Jillayne Schlicke on April 25, 2007 at 9:34 pm
I have a great idea.
Why allow the seller to contribute to closing costs at all?
We only use to allow that on VA loans.
Everyone knows the seller isn’t giving the $10,000 (using Lynlee’s example) to the buyer out of the goodness of his or her heart. The seller and agent raise the sales price and everyone else hopes the appraiser hits value, thereby creating an artificial bubble in the market and in the comparable sales used by other real estate agents and appraisers down the road.
Let’s get real and make the lender finance closing costs by making an above-100% LTV loan, instead of pretending it’s just a lil ‘ol harmless 100% LTV.
Don’t like the interest rate and payment that goes along with that kind of loan? Then save up some money first. Of course if we enact such strict guidelines, the entire industry will scream bloody murder because this will turn off the profit machines.
We need one of our RCG attorneys to jump in here and give some direction to the agents on how the existing NWMLS forms might be able to help the homebuyer, homeseller, and agent.
I can tell you what the Wa State Mortgage Broker Practices Act says, but like I keep saying over and over again, the state does not have enough resources to monitor every single transaction.
ARDELL on April 25, 2007 at 10:36 pm
That is just so gross.
The only time I remember having an issue, the buyer hadn’t selected his lender yet. Then he qualified for the then available First Tech first time buyer program with costs of only $500 or so. We changed the price very early on so the docs were correct the first time.
The very first time it happened escrow called me, the buyer’s agent, and I did POC’s for the Home Inspection fee paid out of pocket, the appraisal paid out of pocket and threw in a warranty for the buyer to suck up the small remainder.
Why would escrow NOT call the buyer’s agent to work this out? Why are they calling service providers and not the buyer’s agent? I don’t get that part.
I do know the first time it happened and I was finding things of the buyer’s to use it for, escrow did say I was the first agent they heard of trying to use the money for the buyer. Isn’t that what it’s FOR? How could I have been the first one scrambling not to lose it?
It is too gross for words. This
is the kind of stuff that happens when we expect too little of agents. Rarely are my original estimates off and never would anyone I work with try to take advantage of that situation. And yet you say it happens all the time.
Shouldn’t the buyer be the first call? The buyer’s agent? Shoot, we could get the place professionally cleaned, make a repair, install a new chandelier…something that benefits the buyer!
ARDELL on April 25, 2007 at 10:47 pm
I don’t like the idea of not allowing for financed closing costs. It’s a tool used for many reasons.
Like the house needs a new roof in a year or two, but is currently “passable”. We can’t get money for a roof from the seller as the lender won’t permit the wording for “roof”. The new roof going up protects the lender for the higher value, even if done after closing. The only way to get the roof money is to say it is for closing costs, and have the buyer use the closing cost money for the roof.
Often the buyer has just enough to put 20% down, but not enough for 20% down plus closing costs. Doing only 15% down gives the buyer PMI or a high rate small second. Allowing him to put 20% down and stack the costs works out better.
I’ve been using stacked costs for negotiating, repairs and to give the buyer a higher downpayment for all of my career. So I don’t know when “used to be only VA” was. If it was before MY time, it was definitely before yours.
FHA includes costs as far as I can remember. It’s been a long time since I’ve done an FHA loan.
Also, if someone is buying a condo, and I know all of the comps had closing costs included, I often equalize by including them. A seller often wants what everyone else got. He wants the price to be X. The price would not be lower without the closing costs, so the only way for a buyer to get a fair shake is to include them too.
No, I don’t like the idea of not allowing them to be in there all of a sudden. Would do a lot of damage to a lot of people. Get tough on the appraisers, yes. But if it appraises for the price with the costs, why penalize the buyer?
ARDELL on April 25, 2007 at 10:50 pm
Lynlee, I’ve seen lenders redo docs in a short time when they make a mistake, why not to capture the buyer’s credit.
I do not agree with suggesting to people reading this that the Price can’t be changed. It can. Depends on the amount of the credit. Once the difference was so small that I let it go back to the buyer and gave the amount to the buyer. Under no circumstances should ANYTHING happen without the buyer being notified first.
Sorry…I’m getting riled up. I’ll go to bed.
Rhonda Porter on April 26, 2007 at 5:53 am
Ardell, this is a gross practice and it does happen. When I cannot use all of the funds, it is credited back to the seller (not me–I like my sleep and I do think about that “golden rule)…although I could easily pump up my origination–I don’t.
When I was in escrow, we did a separate list to show what sellers costs were being paid and the total. We found that the seller and buyer both wanted to know where the money was going.
Rhonda Porter on April 26, 2007 at 5:56 am
I don’t think sellers contributing to closing costs should go away. I think greedy LOs should (go away).