Posted by Ed Garcia on December 27, 2000 at 10:20:02:
Stephanie,
The pleasure is mine, You know that if you need me, I’m a phone call away.
See you in Atlanta,
Ed Garcia
Question re: Mortgage Brokerage situation - Posted by steph in tex
Posted by steph in tex on December 26, 2000 at 18:24:46:
Hello All;
As many of you know, I have recently purchased a Mortgage Company, which is a Brokerage.
We are in a rapid period of growth, and have several Loan Officers that are new and somewhat inexperienced.
One in particular is excellent, and is already producing with my top Senior L/Os. Recently it was brought to my attention that one of the Reps for one of our Lenders (or investors) instructed this employee to set up a deal with a seller 2nd.
She then stated that this is done all the time, and that if it was forgiven at a later date, there was no problem with the Lender.
What?? Am I missing something here? My understanding is that this is considered a “soft 2nd”, that will disappear after closing… is this correct? And that this is fraud, am I correct?
The lender Rep says no. I feel that maybe this rep may not be disclosing this to the lender. My feeling is not to do business with this Rep, and want to get some feedback from you guys as to how I should handle this. I want to build a stellar reputation in this business, but don’t want to get a bad rap either. SO~
Should I contact the Lender? Or just request a new rep?
Will this jeopardise my relationship? Will I get a bad rep in the community?
I don’t want to act in haste, so thought I would put it up here for input. This all becomes kind of political somehow.
I don’t want to screw it up!
Thanks in advance.
Steph in tex
Re: Question re: Mortgage Brokerage situation - Posted by Ed Garcia
Posted by Ed Garcia on December 26, 2000 at 21:50:40:
Hi Steph,
I think you know the answer to the question as your asking it. Stephanie it’s not uncommon for an Account Executive or Loan Rep, to do what I call SPEEDING. As a matter of fact, this is one of the dangers in the business. Not just the loan rep, but many times a mortgage companies loan officers, learn a technique as to how to dance around or circumvent one of their own lending criteria and then proceed to do it.
The problem, because they’re successful in doing so, they now develop an M/O (modus operandi) and get comfortable in operating in this manner. Where it can come back to haunt you is, if ever there are any complaints by other borrowers who know that they weren’t supposed to operate in this fashion, it could get complicated to say the least.
I have seen were a loan officer operated in this manner ,doing deals on a daily basis, until the day came when one borrow was unsatisfied. As you know, the majority of time, loans are sold off to banks, investors, or what have you, now creating a federal offense.
When they investigate the loan file and make discovery, they immediately look to see if this is a one-time offense, allowing the loan officer the benefit of a doubt, or if an M/O is established. Once they determine that an M/O is in effect, it becomes a headhunt.
I think we both know, that if the second was created to disregard down payment and create LTV for the loan, it’s being done to defraud the lender.
To answer your big concern, how do you handle the rep. I would call them in my office and have a friendly chat. I would explain that I realize that they mean no harm in telling my loan rep how to create a soft second, but that this is not the way that you do business. (Steph the problem is that these reps learn from each other and you can pick up another reps bad habits or feel no wrong doing, because everybody seems to be doing it.)
I then would caution them to be careful, because you wouldn’t want to see them get into trouble. And that’s it.
To call their company would not do a lot of good. You don’t know how long a period of time or how many of these deals if any, this rep has done. On the other hand, the entire sales force could be turning their head when doing these types of deals.
Also you don’t even know if this is the first time that this rep structured a deal like this because you don’t have any evidence or proof of other foul play.
I know that you’re concerned about alienating yourself with this group and I understand.
I think once you handle this deal in a diplomatic manner, everyone involved will go about their business knowing were you stand if this type of deal should ever come about again.
Your people should be your main concern. If they feel that you will turn you head, they will look to create this type of loan in a sale, time and time again.
Take care Steph,
Ed Garcia
Re: Question re: Mortgage Brokerage situation - Posted by Ted Bowen(OK)
Posted by Ted Bowen(OK) on December 27, 2000 at 10:57:28:
I have read several of these discussions about soft 2nds here on this board and have pretty much agreed with the thought that it could be considered fraud. BUT not always, I just talked last week with a federal goverment agency(one of our Indian tribe groups) and they were using a program that had just been started by the goverment to help Indians buy a house. The program allowed the buyer to go out and apply for a “conventional” loan and the Indian group would provide closing and down payment assistance up to $7000. This would be carried as a soft 2nd for 3yrs. If the Indian buyers remained in the house for that time the 2nd would then be released.
Re: Question re: Mortgage Brokerage situation - Posted by steph in tex
Posted by steph in tex on December 27, 2000 at 04:58:04:
Hello Again Ed!
You’re right. I was pretty sure about what I needed to do, but you know how sometimes you just need to hear it from someone else? I have a meeting with her (account rep) on Friday. I now plan on Not being too harsh, but looking out for her interests as well. I know you are busy, but I was hoping you’d respond. I know you understand how this business is strangely political sometimes. That is something I can’t say I was totally prepared for.
I am learning to be a leader, and that is a huge responsibility. I have reacted when I should have sought out answers, and that’s why I’m back to the post. I am learning just how crazy this all is, and that it pays to think everything through. This is 10 times harder than I expected, and takes up about 25 times more time than I thought it would. It definately isn’t easy, but it is wonderful (at times). We are growing like crazy, and have a great future ahead. Thank you again Ed, for all the help you gave me early on. I wouldn’t have known where to begin. I don’t want to be a pain, but I do hope to see you in Atlanta so that I can pick your brain once more. I now have a VERY good understanding of just how valuable your time must be!
Thanks for taking time to respond.
Happy Holidays!
Steph in tex
Re: Question re: Mortgage Brokerage situation - Posted by Ed Garcia
Posted by Ed Garcia on December 27, 2000 at 12:00:09:
Ted,
I know they sound the same, but they’re different animals. The concept is the same. The disclosure is what makes the difference.
In the situation we’re talking about, the buyer and seller are creating the soft second, just for the purpose of qualifying the buyer for the sale, by creating equity for the lender. The only intention is to give the lender a false equity position to meet their underwriting criteria.
Your Indian reservation scenario, is designed for first time buyers or to help buyers get into the property. The qualification time frame of two years should provide the lender with equity position with in that period of time. This information has also been disclosed to the lender, and the lender has agreed and is aware of it.
In the event the borrower doesn’t reside at the residence for three years, the loan stays in effect. This also assures the lender that the buyer intends to reside in the subject property for at least that period of time with the incentive provided by the Indian tribe.
Intent, and disclosure, are the two key words.
Ed Garcia