Shmuel Shayowitz (NMLS#19871) is President and Chief Lending Officer at Approved Funding, a privately held local mortgage banker and direct lender. Shmuel has over two decades of industry experience, including licenses and certifications as a certified mortgage underwriter, residential review appraiser, licensed real estate agent, and direct FHA specialized underwriter. Shmuel provides a uniquely holistic approach to comprehensive real estate and financial matters that goes well beyond any single transaction. Shmuel is an award-winning financier recognized for maximizing the short-term and long-term objectives of his client. As a contributing writer to many local and regional newspapers and publications, his insights have been featured in the media for many topics, including mortgages, personal finance, appraisals, and real estate trends.
I received a call from someone who has an accepted offer to buy a home in Bergen County. He was anxiously trying to give me as much information as possible because he was “up against the clock” to decide if he should lock in his loan with the other mortgage person he was dealing with. His attorney expressed some concern over some vague details of the loan fees and suggested he reach out to me.
The caller explained that he had until 5:00 pm to confirm he is moving forward, and pay the lock deposit. The loan officer said he would be unable to guarantee that these fees wouldn’t increase if not locked-in that day because of the recently imposed fee of 0.50% by Fannie Mae and Freddie Mac on all new mortgages. He even told my client to google it and confirm that it’s true.
I immediately told him that the loan officer was either misinformed or blatantly lying. We will get to why I was so confident in my response shortly. Separately, I was able to offer him a rate that was.375% better than what he was being quoted, and without points. The loan officer didn’t believe that my offer was legitimate, and I told my “new client” he can more than happily share it with anyone to confirm. He didn’t even receive a reply to my confirmed numbers.
Unfortunately, this wasn’t the first time, and won’t be the last time, that I have heard loan officers pressuring applicants to “commit” and “lock-in” before something changes and increases. I find these “scare tactics” to be unfair and unethical. I have lost many clients because I refuse to “bully” (his words, not mine) clients into making pressured decisions before they have time to absorb the information and ask the right questions.
That said, the bully-of-the-week award goes to the Federal Housing Finance Agency (FHFA). This week FHFA announced that they would impose a new half-of-a-percent fee for all new refinance loans being sold to Fannie Mae and Freddie Mac, the governmental agencies they regulate. After the housing market crash in 2008, Fannie and Freddie went into conservatorship and were put under the control of the newly created FHFA. Although most mortgages need to comply with their guidelines, Fannie Mae and Freddie Mac do not actually lend money to homeowners. They buy “conventional” mortgages from lenders and package them into securities that are then sold to investors, similar to a bond.
According to the FHFA, by packaging mortgages into mortgage-backed securities “MBS” and guaranteeing the timely payment of principal and interest on the underlying mortgages, Fannie Mae and Freddie Mac attract investors who might not otherwise invest in mortgages, thereby lowering the expense of mortgages. Simply put, their role is to make home financing affordable and economical. Close to 90% of conventional mortgage loans are sold to Fannie or Freddie after being originated by banks, credit unions, and mortgage lenders throughout the U.S.
This week, they decided to do a “money grab,” and without any advance notice, FHFA announced a fee (i.e., a “tax”) for all new refinance loans, whether there is a “cash-out” or not, that are being sold to these agencies. The fee, which equates to $2500 on a $500,000 loan size or at least.125% higher in interest rate, was immediately incorporated into real-time rate quotes. The bottom line is that going forward, these fees become the burden of the consumer. For all loans that were already locked, the cost will be absorbed by the bank or lender as they have already committed the rate and fee to the consumer and have no alternative.
I was able to positively determine that the loan officer was misrepresenting to my client because this “tax” does not apply to mortgages being obtained to “purchase” a home. It is unfortunate when the consumer is caught in the middle of an overly aggressive loan officer or regulator who is merely looking to capitalize at the expense of others. Luckily, my new client was not “shaken down,” and he ended up getting better rates and terms from me because of his astute attorney. Not everyone will be so lucky.
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