1. © 2013 All rights reserved. Chapter 7 Mortgage Brokerage1 New York Real Estate for Salespersons, 5 th e By Marcia Darvin Spada Cengage Learning

2. © 2013 All rights reserved. Chapter 7 Mortgage Brokerage2 Chapter 7 Mortgage Brokerage

3. © 2013 All rights reserved. Chapter 7 Mortgage Brokerage3 Chapter 7 Key Terms  Lender rebate  Mortgage banker  Mortgage broker  Mortgage broker dual agency disclosure form  Mortgage commitment  Nonconforming form  Pre-application and Fee agreement  Pre-approval  Prequalification  Rate lock  Underwriting

4. © 2013 All rights reserved. What is a Mortgage Broker? An individual or company registered by the NYS Department of Financial Services Finds or sources loan for purchaser Chapter 7 Mortgage Brokerage4

5. © 2013 All rights reserved. NYS Requirements for a Mortgage Broker Registration Requirements Good standing in community 2 years of credit analysis experience Credit Report Fingerprints $99 Fingerprint Fee $1,500 Investigative Fee Surety bond for $10,000 Chapter 7 Mortgage Brokerage5

6. © 2013 All rights reserved. NYS Dept of Financial Services Licenses and Registrations  Mortgage loan originator license for individuals  Mortgage loan servicer registration for companies  Apply online to the NYSDFS through the Nationwide Mortgage Licensing System (NMLS)  Mortgage broker registration for companies  Mortgage banker license for companies  Mortgage loan originators must work under the supervision of a mortgage banker or mortgage broker Chapter 7 Mortgage Brokerage6

7. © 2013 All rights reserved. Experience for the Broker Registration  May use his broker license to become a mortgage broker  Broker license must be current  Must have actively participated in the residential mortgage business for two years Chapter 7 Mortgage Brokerage7

8. © 2013 All rights reserved. Dual Agency Disclosure under the Banking and NY Real Property Laws  Mortgage brokers who are also real estate brokers representing the seller may find themselves in a dual agency situation  Legal with disclosure and informed consent  Article 12-D of NY Banking Law  Mortgage broker and mortgage banker who is also a real estate broker in the same residential real estate transaction must disclose the dual agency  Real Property Law  Section 443 also requires dual agency disclosure  The real estate agency disclosure form is used when the property requires an agency disclosure form (one- to four-unit residential properties) Chapter 7 Mortgage Brokerage8

9. © 2013 All rights reserved. New York Mortgage Banker Requirements Requirements Net worth of At least $250K Existing Line Of Credit For $1mil Filing of Surety Bond For $50K Employees With 5 yrs Experience Demonstration Of good character Background Report Fingerprints, $99 fee, $3k investigative fee Chapter 7 Mortgage Brokerage9

10. © 2013 All rights reserved. Mortgage Brokers vs. Mortgage Bankers  The requirements to become a banker or a broker are much different  A mortgage banker may be responsible for collecting the mortgage payments and risk its own credit  The mortgage banker typically sells the loan to a larger lender  A mortgage broker does not lend his company’s money Chapter 7 Mortgage Brokerage10

11. © 2013 All rights reserved. The Role of the Mortgage Broker/Consultant in the Real Estate Transaction  A mortgage broker/consultant can streamline the process and find the financing  The real estate agent may recommend a mortgage broker when a purchaser is not already working with someone  Agent generally requires a pre-qualification letter  A prequalification is not a commitment to the lender  Loan officer must first determine that a purchaser is qualified then issues the letter  The buyer’s attorney wants to know when a mortgage commitment is finalized Chapter 7 Mortgage Brokerage11

12. © 2013 All rights reserved. Obtaining a Mortgage Commitment OOnce a purchaser signs a sale of contract he has a certain number of days to obtain a mortgage commitment TThis commitment is a statement by a lending institution that assures the purchaser that the lender will loan a certain sum of money LLoan underwriting is the process in which the lender evaluates all of the borrower’s financial data and determines whether the borrower will obtain the loan Chapter 7 Mortgage Brokerage12

13. © 2013 All rights reserved. Finding Mortgage Products ARMs (Adjustable Rate Mortages) Construction Loans Conforming And Nonconforming Loans Fully Amortized Loans A nonconforming loan: A loan that does not meet Federal Reserve Banking criteria for funding. Some mortgage backed securities Chapter 7 Mortgage Brokerage13

14. © 2013 All rights reserved. Scheduling and Closing the Loan  Mortgage broker Assists with:  Assuring that lender conditions are satisfied and funds are available at closing  Scheduling a date for closing between all parties  Some mortgage brokers process loans and close loans in their own name  At or about the time of settlement they transfer these loans to lender who then advance funds for the loans  Known as table funding Chapter 7 Mortgage Brokerage14

15. © 2013 All rights reserved. Mortgage Broker’s Commission Paid By The Borrower Proceeds From The Loan Yield Spread Premium  Yield spread premium (lender rebate):  difference between interest rate on a par loan and an above par loan that a mortgage broker can deliver to the lender  expressed in the number of points paid to a mortgage broker Chapter 7 Mortgage Brokerage15