In this episode, I interview Chris Sommers, CFA®, director of the Mortgage Loan Modification Center at the Federal Home Loan Bank of New York. As a former mortgage broker, Chris tells me how to become a more educated and discerning lender by becoming more aware of your client’s financial situation and your own needs as a lender.
There are a lot of loan estimators out there these days, many of whom are just guessing based on assumptions made by their clients. In Chris’s case, he’s a former mortgage broker and has been in the industry for over 20 years. He tells me to stop doing that and to become an informed borrower.
We’ve all heard the argument that some of the smartest and most experienced loan consultants have been in the know. All of us have been, from the beginning, able to figure out what to do. We know what we’re doing to the next step. We know what we’re doing to the next step. If a few loans become too expensive, then we can move on to new ways to get more money for the next step.
But how do we know we know what to do? Because broker tells me to stop doing this business. I have never really been an investor, and I can tell you that the few times I have, they were not an informed investor.
We can do it all without going through a formal review. It’s a good idea to have a review done at some point, right after you’ve done the first step for the last step. Then you can get a look at if the loan can’t be taken out. It’s a good idea to have a look at the loan and see if it can be taken out.
Brokers, even when they are doing a good job, can be wrong. The fact is that brokers are not always a good source of information. It’s not that they are wrong, its that they are often wrong. But they are not usually wrong enough to put you under the rug. Their job is to sell you goods and services, and with a lot of people making loans today, the market is very competitive.
Its not that they are wrong, but more that they are wrong enough that the borrower has no way to ever know they are wrong. For example, many lenders will offer the borrower a “best rate” but then they are wrong in their calculations and the borrower is left holding the bag.
The lenders who make loans today have no way to know about this. They just sell you the loan, not the loan itself. Which is why it is important to get your loan estimates right. The lenders are not going to know if you are understating what you owe and overstating what you owe. This is why lenders are so quick to tell you to go screw yourself. This is why they are so quick to offer you an unreasonable rate.
