This statement is a common point of contention among buyers who haven’t bought a home since the 2008 housing market crash. If you’ve seen the movie The Big Short, it’s actually pretty accurate to how it was back then. Mortgage brokers could get paid by what kind of loan they sold, borrowers weren’t being asked for income proof (hence why the exotic dancer could have five homes and a condo), and there was really no form of control on the industry. All this has changed since then, and in big ways.
This is the most relevant change since the crash, and one which mort people are not accustomed to. There used to be something called NINJA Loans, which stood for ‘No Income No Job or Assets’. People could just walk into a bank and ask to buy a $400K home, and get approved without having to provide documentation they could afford such a home. In fact, this is how my mother was able to buy my college home in just her name despite not holding a job at the time. Now, mortgage lenders require plenty of documentation including, but not limited to, W-2’s, tax returns, verification of employments, 1099’s, etc. I once had a buyer who hadn’t bought a home since the 90’s. He left off 4 pages of his tax returns showing a $72K business loss to try and get a loan, because he could get away with it back then. Today, that’s called mortgage fraud and is punishable by some serious prison time.
Consumer Financial Protection Bureau
This one has only been in place for a few years, but one still aimed at protecting the public. This particular agency covers a few different areas, but i’ll give some examples of things it’s in place for. Lenders, rightly, cannot share sensitive borrower financial data with their Realtor, sellers Realtor, or anyone else involved within the transaction without consent of the borrower. They can share vague information, such as ‘ratios are tight’, ‘they are enough to qualify for this program’, etc. But not a whole lot else. Actually, unless you’re signing papers are closing or represented one of the parties in the transaction, you’re really not allowed to be in the room at closing either without the consent of the client. Most title companies don’t enforce it, but it’s true.
I’ve never been a fan of kickbacks in general, as the concept alone is deceiving to the consumer. But it’s now not legal among lenders, Realtors, and title companies. Notice I didn’t say builders. I’ll get to that shortly. There are severe fines and penalties now for kickbacks among those of us licensed in the industry. There have been a few cases since these laws were put in place where Title Companies would charge an extra fee to the consumer, and kick it back to a Brokerage, or a Lender would do the same for a Realtor. But it’s illegal, and rightfully so. I make recommendations to my clients for lenders, insurance, and other service providers, but without compensation if they use my recommendations. I do so knowing they are in the best hands to handle their business properly and professionally, and with the consumers best interest at heart. Now, let’s go back to the builders part mentioned earlier.
Just about every builder has a preferred lender and title company, and they usually have some sort of incentive to use them instead of your own. The incentives often have financial stipulations, ranging from having the title policy paid for or kicking in for your closing costs. Is it the best thing for you? Not always. Builders can often receive kickbacks from those relationships if a borrower uses their people, but that doesn’t mean it’s in your best interest to use them. Remember, the sales rep in the front office is not a state licensed Realtor, and works for the builder instead of you. I always recommend having your own Realtor when buying a new home, especially because it’s FREE!
So if you’re in the market to buy a home, Contact Me Today! I can help you get set up with mortgage and insurance people to make sure you’re able to buy a home and have the best coverage.
You can also get a copy of my Home Buyers Handbook when buying to learn about the process!