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I am asked this question many times. In short, a mortgage broker partners with many banks. Legacy Mortgage, Inc. has partnerships with more than 26 banks located in Hawaii and on the mainland. All banks have different rates, different products, different underwriting standards and different specializations or "niches." This is the reason why one bank may deny your loan, while another bank will quickly approve it. Or, one bank's closing charges are higher, while others are lower. The role of the mortgage broker is to get the borrower the best loan, at the best price, and in the least amount of time.

Overall, loan officers at banks are loyal to their bank first, then to the borrower. The best interest of the borrower is always after the best interest of the bank. Mortgage brokers are only loyal to their borrowers. Without borrowers, mortgage brokers are not paid and cannot earn a living.

The U.S. Department of Housing and Urban Development (HUD) significantly revised the lending requirements under RESPA/Regulation X. These changes impact the Good Faith Estimate (GFE) and HUD Settlement Statements (HUD-1) and will be effective with new first mortgage applications taken on or after January 1, 2010.

In a nutshell, the biggest change is how the Good Faith Estimate is calculated and presented to the borrower. Prior to this new change, a Good Faith Estimate was provided to the borrower and gave an estimate of the charges and cost for the loan. Now, much of the cost on the new GFE is binding and/or have a tolerance of 10% in change from presentation of the GFE to the final closing cost when the loan is recorded.

In the past, the borrower paid for the charges that were not listed on the GFE or were under estimated when first presented. Now, since many cost items cannot be increased, the bank or mortgage brokerage will pay for what ever cost that was not listed or increased in the original Good Faith Estimate.

The intent of these new changes are for the benefit of the borrower. Now the banks and mortgage brokers are extremely cautious and sometimes "scared" when preparing a GFE. There are stories circulating that on some loans, the banks and loan officers actually lost money in closing the loan.

Overall, mortgage originations have declined since this new law took effect January 1, 2010. Many banks and mortgage brokerage firms are still trying to adjust to these new changes. Hopefully, the industry will figure our how to efficently adjust to this new law in the coming months.

The Home Valuation Code of Conduct, HVCC, a government guideline on appraisal ordering went into effect on May 1, 2009. In a nutshell, all appraisal ordering must originate from the lending banks instead of the Mortgage Brokers. The intent of this new guideline is to stop Mortgage Brokers from influencing the appraiser on the value of properties. The HVCC will be in effect for 18 months.

REPERCUSSIONS OF THE HVCC:
1. Appraisal values are lower and more convervative.
2. Loan files cannot be transferred from one lender to another without ordering a new appraisal from the new lender.
3. Mortgage brokers and banks are canceling many loans due to low values on the subject properties.
4. HVCC is not good for borrowers, banks or mortgage brokers.