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The Mortgage Originator Success Kit
By Darrin J. Seppinni
The McGraw-Hill Companies, Inc.Copyright © 2006Darrin J. Seppinni
All rights reserved.
INTRODUCTION TO THE MORTGAGE BUSINESS
The greatest thing a man can do in this world is to make the most possible out of the stuff that has been given him. This is success, and there is no other.
—Orison Swett Marden
Before we launch into the basics of the business, it's helpful to be familiar with, essentially, who's who and what's what.
A person who represents a specific banker or wholesale lender. This individual has detailed information, including guidelines and rates on the loan programs the lender offers. The account executive is the contact person for the mortgage loan originator or broker. Account executives are responsible for initiating and maintaining relationships with local mortgage brokers, Realtors, builders, and other business partners as a referral source for the origination of home loans.
An individual who provides an opinion of the property's fair market value based on specific market data. A person who conducts routine appraisals of residential, industrial, and commercial properties.
A person who applies for and receives funds in the form of a loan and is obligated to repay the loan in full under the terms of the loan.
Builder or Developer
A person or company that is actively involved in the building of homes for sale. A developer prepares raw land so that it can be built upon.
Credit Reporting Agency
An agency that compiles, maintains, and provides credit and other personal information to creditors. This information includes bill-paying habits, credit account references, balances, and place of employment. There are three major credit bureaus that provide nationwide coverage of consumer credit information in the United States: Equifax, Experian, and TransUnion.
A procedure in which a third party acts as an intermediary for both the buyer and the seller, carrying out both parties' requests and assuming responsibility for handling all the paperwork and distribution of funds.
The institution or individual (in the case of a private lender) who provides the funds when a mortgage loan is made. Lenders typically have warehouse lines (lines of credit) to fund loans before they are sold to the secondary source. Brokers typically do not have warehouse lines and therefore cannot fund loans.
A person who, for a commission or fee, takes the borrower's application and finds the best loan program to fit the borrower's needs.
A company that works with the customer after the loan closes to provide customer service by collecting mortgage payments and to provide an escrow account if necessary. If an escrow account is established, the servicer pays the property taxes and insurance payments.
A direct mortgage lender who originates and funds loans in his or her own name for resale in the secondary mortgage market (Fannie Mae, Freddie Mac, Ginnie Mae).
Also known as a broker. A person or company that arranges mortgage loans through a mortgage banker or lender (also known as a wholesale banker or lender). The broker establishes a relationship with this banker or lender and acts as the intermediary between the borrower and the banker or lender. Typically, the broker has a relationship with more than one banker or lender, allowing the broker to shop the loan in order to find the best rate and term available to suit the borrower's needs. The broker does not fund loans (or lend money).
Mortgage Insurance Company
A company that insures the lender for higher-risk loans. These insurance policies protect the lender by paying the costs of foreclosing on a house if the borrower stops paying the loan. Mortgage insurance (MI) is typically required for conventional loans with a down payment of less than 20% of the sale price. To avoid MI, a second mortgage at a higher interest rate can be obtained.
A person working with the loan originator who gathers information provided by the originator, applicable to the loan file, and submits the loan for a decision to the lender. The processor gathers information needed to meet all the conditions requested by the lender in order to fund the loan.
A person licensed to negotiate and transact the sale of real estate on behalf of either the borrower or the seller, and in some cases can represent both parties.
Real Estate Agent
A person who is licensed to negotiate and transact the sale of real estate property. This person can represent either the seller or the buyer or both.
Real Estate Broker
A person who supervises agents with less experience to effectively run a real estate office. Brokers have high levels of knowledge and experience in the areas of advanced real estate practice, law, finance, appraisal, economics, property management, escrow, and/or real estate office administration. Many brokers own the firms they work in; others work with national real estate franchises.
A person or company that measures the boundaries of a parcel of land, including any improvements. The surveyor prepares a report known as a survey. Most lenders require a survey of the property in a purchase transaction.
Also known as the settlement agent. A company that acts as the go- between in coordinating the closing between the buyer, seller, and lender. The settlement company usually is an escrow company or a settlement attorney, depending on the state where the property is located. The settlement company serves as the meeting place between the related parties of the mortgage where the mortgage documents are executed and the property ownership is transferred to the buyer on a purchase transaction. The settlement company collects all money in the transaction and disburses the money to the proper parties.
A lawyer or attorney who specializes in real estate. Settlement attorneys are not required in every state. They will perform the same duties as an escrow or settlement agent.
The company that provides a title policy and title exam. The title company is also responsible for the recording of the deed and all other legal documents. Title companies specialize in doing title searches and insuring title to property.
An individual who works for the lender and reviews the loan file for the purpose of making a decision on the loan. The underwriter is responsible for reviewing a loan application and determining whether to make a loan based on credit, income, debt, appraised value of the house, and other factors. An underwriter is responsible for evaluating the loan to determine the risk involved for the lender. Many loans are also underwritten via automated systems such as Freddie Mac LP (Loan Prospector) and Fannie Mae DU (Desktop Underwriter).
A lender that typically works only with mortgage brokers. Wholesale lenders accept completed loan packages and underwrite them. They offer mortgage brokers discounted pricing in return for the up-front work done
Excerpted from The Mortgage Originator Success Kit by Darrin J. Seppinni. Copyright © 2006 by Darrin J. Seppinni. Excerpted by permission of The McGraw-Hill Companies, Inc..
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