© 2013 All rights reserved.Chapter 7 Mortgage Brokerage 1

New York Real Estate for Salespersons, 5th e

By Marcia Darvin SpadaCengage Learning

© 2013 All rights reserved.Chapter 7 Mortgage Brokerage 2

Chapter 7

Mortgage BrokerageMortgage Brokerage

© 2013 All rights reserved.Chapter 7 Mortgage Brokerage 3

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

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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 Brokerage 4

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NYS Requirements for a Mortgage Broker Registration

Surety bond for $10,000

$1,500 Investigative

Fee

$99 Fingerprint

Fee

Fingerprints

Credit Report

2 years of credit analysis

experience

Good standing

in community

Requirements

Chapter 7 Mortgage Brokerage 5

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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 Brokerage 6

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Experience for the Broker RegistrationMay 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 Brokerage 7

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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 Brokerage 8

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New York Mortgage Banker Requirements

Fingerprints, $99 fee,

$3k investigativefee

BackgroundReport

DemonstrationOf good

character

EmployeesWith 5 yrsExperience

Filing of Surety Bond

For $50K

Existing LineOf CreditFor $1mil

Net worth ofAt least $250K

Requirements

Chapter 7 Mortgage Brokerage 9

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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 Brokerage 10

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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 Brokerage 11

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Obtaining a Mortgage Commitment

Once a purchaser signs a sale of contract he has a certain number of days to obtain a mortgage commitment

This commitment is a statement by a lending institution that assures the purchaser that the lender will loan a certain sum of money

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 Brokerage 12

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Finding Mortgage Products

ARMs(Adjustable

Rate Mortages)

Conforming And Nonconforming

Loans

Fully Amortized

Loans

ConstructionLoans

A nonconforming loan:A loan that

does not meet Federal Reserve Banking criteria for funding.

Some mortgage backed securities

Chapter 7 Mortgage Brokerage 13

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Scheduling and Closing the LoanMortgage 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 Brokerage 14

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Mortgage Broker’s CommissionPaid By

The Borrower

Proceeds From The

Loan

YieldSpread 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 Brokerage 15