Home Mortgages – The Truth

Sequim and Port Angeles – The truth about mortgages as written by Buck Gieseke and published with his permission.

You’ve undoubtedly seen the advertisements where certain mortgage originators claim their company requires a lower level of documentation than the other folks in the business.But since most lenders are selling their loans on the secondary market, it is at the discretion of the agency purchasing the loan as opposed to the lender as to what is or is not required (regardless of whether or not the loan servicing is retained). What would be the point of asking for more paperwork than is actually needed? You would be hard pressed to find a busy originator that did not take the position of “less is better” when it comes to the number of documents it takes to get a deal to the closing table. It is simply a matter of square peg, round hole; if it doesn’t fit the requirements, its not salable on the secondary market.

The required documents are in place for three reasons. I touched on the first reason in the previous paragraph; certain documents are the requirement of the agency that buys the paper or IOU. The most competitive rates and programs are typically underwritten according to guidelines put forth by FNMA, FHLMC or GNMA (a.k.a. Fannie, Freddie & Ginnie). If a consumer wants a conforming 30 year fixed rate mortgage, the necessary paper work in any given region is going to be the same institution to institution.

The second reason is of federal proportions. On a national level, our government has a paternal interest in making sure that each federally related mortgage transaction meets certain standards of uniform disclosure (much of which is in place to limit fraud by consumer and in some cases, the lending institution).

Finally, each state will have varying additional requirements as virtually all have enacted some form of governing law covering mortgage lenders. Should claims of “less paperwork” be taken with a grain of salt or is there further evaluation to be done? Not one for paralysis of analysis, I still find it difficult not to wonder on what basis these claims are being made. Maybe it can be paralleled to “buy now, pay later.” Literally. Less paperwork at the front end of a transaction will inevitably require more paperwork (and potentially cause problems) as the closing day approaches. It is not uncommon for an application package to contain 12 to 18 “compliance” or required documents. Possibly more if a second mortgage is utilized for purchase money or to avoid mortgage insurance (good future topic). Less paperwork may be indicative that something is amiss.

A reputable local mortgage professional will not play games with these critical items for several reasons. Aside from the matter of high ethical standards and good client relations (and hopefully word-of-mouth referral business in the future!), a quality lender will provide full disclosure and explanation of all required documents at application. The closing table is hardly the place to clear up confusion. Originators conducting themselves under the highest standards also preserve their company’s ability to do business and avoid potential violations of the federal Truth in Lending Act and the federal Real Estate Settlement and Procedures Act (RESPA).

Need a home loan in Sequim or Port Angeles? Buck Gieseke is a loan officer for Integrity One Home Mortgage, Inc., and can be reached by email or phone at: buck@iohmi.com or 360-565-2070. You can also find him on the Internet at: www.iohmi.com