Wish list for a mortgage system makeover: Build your own mortgage, easier appraisals

All we want for Christmas is mortgage application reform.

By Jeff Lazerson | jlazerson@mortgagegrader.com | MortgageGrader.com | December 11, 2021

Maybe it’s just holiday season wishful thinking.

Common sense, sincere concern to end the status quo and lots of intestinal fortitude from government rulers are the metaphorical ingredients required to get on the best path to support America’s mortgage shoppers and mortgage payers.

Here is a holiday season wish list from the consumer lens:

1) Stop selling my personal information. For example, if a mortgage lender pulls my credit, I have 50 other Tom, Dick and Harry’s calling me to tell me about their mortgage offerings. It’s none of their business. But government officials believe otherwise about triggered leads and sharing your personal data.

2) Provide consumers access to the government’s high-quality appraisal estimators. In a word: transparency. All I know is the place is worth at least X if I receive a property inspection waiver when I’m applying for a conventional mortgage. No waiver means I’m just guessing at what the place might be worth.

Taxpayer-owned Collateral Underwriter (from Fannie) and Loan Collateral Advisor (from Freddie) are the best property data analytics on the planet. Every licensed appraiser is required to turn in their completed conventional appraisals to the mortgage giants. It’s the Fort Knox of residential real estate data.

What’s the big secret? Why don’t you alert me if I might be overbidding? How is that not predatory lending when Fan and Fred know the true market value before the sale closes but don’t inform me?

3) Allow me to pick my mortgage payment due date each month. It might be a lot easier on my monthly cash flow if my mortgage is due on the 16th as I’m paid on the first and 15th. Why does it have to be due on the first when it comes to first trust deeds? After all, home equity lines-of-credit and auto loans have random due dates.

4) Everywhere you turn, someone in government is clamoring about green energy. Mandate green energy financing for every mortgage. Whether it’s solar panels, insulation or new windows it’s a great investment for my home, my local utility companies and our environment.

Why should I have to pay much higher rates going through the California PACE program (property assessed clean energy), for example? Or worse, maybe I want a home equity line of credit to pay for my green energy needs but I don’t have the equity.

5) New rule: I control and provide mortgage lender access to one and only one mortgage application credit report. I pull the three-bureau credit report and credit scores under my name. This way there is no commercial lender inquiry as credit inquiries can ding my FICO scores as little as zero points and as much as 10 points.

It’s ludicrous the government tells me to always shop around, but if I do shop around, my scores can potentially drop with each new lender inquiry. Lower FICO scores can equate to more expensive mortgage rates and fees.

6) You’ve heard of Build-a-Bear? Why not build a mortgage? Have it your way.

For example, how about a 40-year mortgage amortizing over the first five years but providing an interest-only option for the next 10 years because you are retiring in five years. Or, maybe your best option is the graduated-payment mortgage because your income will certainly increase over time.

Think “dropdown menu” just like when you go online to order through Door Dash. Today’s awfully tight and narrow mortgage menu is designed to make it easier for mortgage lenders to sell mortgages to investors and manage loan servicing. Nope. It’s never about you.

7) Allow me to originate and sign my own mortgage loan application. I’m smart and my transaction is simple. Why do I have to go through a Mortgage Loan Originator or MLO (licensee) or “registered” bank or credit union loan officer? I can sell my home for sale by owner if I want and forgo the commission. But I can’t write my own mortgage?

8) Prohibit large public and private equity firms from competing with me for single-family home purchases across America. It’s hard to achieve the American dream of homeownership when I do not stand a financial chance of competing with the single-family rental cartel.

9) Require every real estate settlement service provider to sign an affidavit (under penalty of perjury) that he or she is not receiving anything of value for referring settlement services. That’s real estate agents, mortgage originators, escrow officer, title insurance representative’s termite inspectors and the like.

Transactional costs will drop dramatically because consumers will no longer be discouraged from shopping around for service providers instead of being hoodwinked into using the often-higher priced kick backers.

10) Provide Neighborhood Hero housing subsidies (lower down payments and artificially lower mortgage rates) for the likes of teachers and janitors, health care workers and police officers. We don’t want those important community members to be lifelong renters or be forced to quit their local jobs and buy a home far away because their meaningful work doesn’t translate into being able to afford more expensive Southern California communities.

A holiday wish list, indeed.

Freddie Mac rate news
The 30-year fixed-rate averaged 3.1%, down one basis point from last week. The 15-year fixed-rate averaged 2.38%, one basis point lower than last week.

The Mortgage Bankers Association reported a 2% increase in mortgage application volume from the previous week.

Bottom line: Assuming a borrower gets the average 30-year fixed rate on a conforming $647,200 loan, last year’s payment was $136 less than this week’s payment of $2,764.

What I see: Locally, well-qualified borrowers can get the following fixed-rate mortgages without points: A 30-year FHA at 2.375%, a 15-year conventional at 2.5%, a 30-year conventional at 2.99%, a 15-year conventional high balance ($647,201 to $970,800) at 2.625%, a 30-year high balance conventional at 3.19% and a jumbo 30-year fixed at 2.875%.

Note: The 30-year FHA conforming loan is limited to loans of $477,250 in the Inland Empire and $548,250 in LA and Orange counties.

Eye catcher loan program of the week: A 30-year mortgage with an interest-only adjustable rate for the first 10 years at 2.875% without points.

Jeff Lazerson is a mortgage broker. He can be reached at 949-334-2424 or jlazerson@mortgagegrader.com. His website is mortgagegrader.com.

* Specific loan program availability and requirements may vary. Please get in touch with your mortgage advisor for more information.