Originating Mortgage Loans

Originator Times Online (02/26/07)
Consumerinfo.com, doing business as Experian Consumer Direct, will pay $300,000 to settle Federal Trade Commission charges that ads for its "free credit report" offer failed to disclose adequately that consumers who signed up would be automatically enrolled in a credit- monitoring program and charged $79.95. The FTC alleged that the failure to clearly disclose the enrollment and charges violated a previous settlement.
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During my early morning review of the news and favorite Blog sites, I came across a Blog written by Rhonda Porter titled "Pre-Approval Letter Defined." Rhonda is a top mortgage originator in the State of Washington and in her Blog she wrote a very clear and concise article about Pre-Approval Letters.

Pre-Approval Letters are something hardly ever mentioned in the press, however in the mortgage and real estate community, it is a topic hotly contested and subsequently has caused issues on numerous real estate transactions. On countless occasions, Realtors, builders and clients have received a pre-approval letter and late in a transaction find out the borrower does not qualify. In many cases, the subject borrower has already moved out of their previous home/apartment, the individuals they are buying the home from have done the same and the home they are buying is dependent upon their buyers getting financing to close. In essence, there is a domino effect with many transactions dependent upon the down line escrow to close.

Sound familar?

Bottom line; borrowers need to understand what their"pre-approval letter" is and:

1. Their Pre-Approval Letter is only as good as their Mortgage Professional (not always the one who gives them the lowest rate/costs).
2. They are selective about the lender and pre-approval letter they accept.
3. Have them read Rhonda's Blog - "Pre-Approval Letter Defined"

Below are a few other sites related to pre-approval letters:

Don't Forget Your Pre-Approval Letter

Pre-Approval Letter - What Is It Worth?

Clarifying Pre-Approval versus Pre-Qualification

How Do I Get Pre-Approved

Broker Magazine (02/21/07); Dymi, Amilda
Originators need to become familiar with these methods as they reach out to new markets in 2007. Alternative credit reporting is in its infancy, but everyone agrees it is a service there is a need for. New research shows lender demand is growing, albeit cautiously. And defining factors come as much from cause and effect in a softer mortgage market where lenders look for new customers, as from technology solutions available, better risk monitoring tools and many programs now mushrooming in the marketplace.

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Charlotte Observer (NC) (02/21/07); Appelbaum, Binyamin
Wells Fargo Home Mortgage has announced that it will shutter two subprime business centers--one in Fort Mill, S.C., and one in California--due to rising subprime defaults and a drop in demand for high-rate loans. The downsizing will leave 250 people at the Fort Mill operations facility without jobs, but some will be transferred to a different division in the same city. The operations centers fund high-rate loans for mortgage brokers and also buy such loans from other lenders. In response to the climbing default rate, Wells Fargo Home Mortgage has imposed stricter lending requirements and emphasized its commitment to helping borrowers obtain the best financing terms for which they qualify.
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For further insight, refer to blog posted February 20, 2007 titled:

Sub-Prime Market Tightening - Yes There Is a Positive Side