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© 2013 All rights reserved. Chapter 7 Mortgage Brokerage1 New York Real Estate for Salespersons, 5 th e By Marcia Darvin Spada Cengage Learning
© 2013 All rights reserved. Chapter 7 Mortgage Brokerage2 Chapter 7 Mortgage Brokerage
© 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
© 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
© 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
© 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
© 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
© 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
© 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
© 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
© 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
© 2013 All rights reserved. Obtaining a Mortgage Commitment OOnce a purchaser signs a sale of contract he has a certain number of days to obtain a mortgage commitment TThis commitment is a statement by a lending institution that assures the purchaser that the lender will loan a certain sum of money LLoan 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
© 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
© 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
© 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
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