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Are you a direct lender?

I received a call the other day asking me this same question and i wanted to share my opinion on the matter. The difference between a direct lender and a brokerage is that a direct lender uses their own money too lend. They are bound by their own set of rules, unlike a brokerage who acts as a mediator between wholesale lenders and the consumer. Direct lending has it's benefits, but it also has it's disadvantages. The main advantage is that they have an underwriter, a doc department and funding team in-house, but at the same time technology has come along way. Underwriters, doc drawers, funders, etc.. are an email or phone call away now. Some wholesale lenders have even set shifts in which underwriters take turn taking calls from loan officers working for a brokerage to answer any questions they may have. One of the disadvantages of a direct lender versus a wholesale lender is flexibility within their guidelines. 
Also, the uncompromising policies of the underwriters. Unlike a brokerage, if for some reason guidelines are not met initially, another lender can be quickly contacted to fit that particular scenario.

As a brokerage... relationships are created with several banks (Mountain West Financial, Wells Fargo, PMAC, PMC, American Equity, CMG Mortgage, Flagstar, Trust One, and a few more). If one bank doesn't want the loan, the loan officer can pick up the phone and call another until a match is made. It sounds easier than it really is and I must address the fact that some guidelines are industry standard and must be followed. Other guidelines are bank specific and because of that, brokers can be an ideal solution.

What else is different between a direct lender and a broker? Fees are a big one. A broker's fees are usually higher than a direct lenders, but the rates may be a little lower. A broker obtains rates at a wholesale amount and passes the savings to the customer. Brokers must disclose the yield spread premium (YSP) or rebate as it is known in the industry. Where as a direct lender has no obligation to disclose that same information leaving you in the dark. The consumer will always know how much the compensation is to monitor if predatory lending is present. The fees that a broker charges can be negotiated and reduced to a certain point to match a direct lender.

We are a Rancho Cucamonga based brokerage working with people that are highly motivated to buy a home. If credit is a problem we take the steps to improve it, if showing income is a problem we usually find more within your documents. Hire us if you want someone to fight for you and to work diligently to get you the financing you need to buy your home.

There are stipulations to this waiver:

Lenders develop concerns when the sales price of the property is 20 percent or more over and above the seller's acquisition cost. Because of it, most lenders will require (2) full appraisals (starting 2-15-2010 the appraisers will be ordered through the lenders directly).

All transactions must be arms-length transactions, with no identity of interest between the buyer and seller or other parties participating in the sale transaction. Some ways to ensure that there is no inappropriate collusion or agreements between parties is to assess and determine the following:

• The seller holds title to the property;
• LLCs, corporations, or trusts that are serving as sellers were established and are operated in accordance with applicable state and Federal law;
• No pattern of previous flipping activity exists for the subject property, as evidenced by multiple title transfers within a 12 month time frame (chain of title information for the subject property can be found in the appraisal report);
• The property was marketed openly and fairly, via MLS auction, For Sale by Owner offering, or developer marketing (any sales contracts that refer to an "assignment of contract of sale," which represents a special arrangement between seller and buyer may be a red flag).

In cases in which the sales price of the property is 20 percent or more over and above the seller's acquisition cost, the waiver will only apply if Originator:

• Justifies the increase in value by retaining in the loan file supporting documentation and a second appraisal which verifies that the seller has completed sufficient legitimate renovation, repair, and rehabilitation work on the subject property to substantiate the increase in value or, in cases where no such work is performed, the appraiser provides appropriate explanation of the increase in property value since the prior title transfer, AND
• Orders a property inspection and provides the inspection report to the purchaser before closing. The lender may charge the borrower for this inspection. The use of FHA approved inspectors or 203(k) consultants is not required. The inspector must have no interest in the property or relationship with the seller, and must not receive compensation for the inspection from any party other than the lender. Also, the inspector may not compensate anyone for the referral of the inspection. Additionally, the inspector may not receive any compensation for referring or recommending contractors to perform any repairs recommended by the inspection, and may not be involved with performing any repairs recommended by the inspection.

At a minimum, the inspection must include:

• The property structure, including the foundation, floor, ceiling, walls and roof;
• The exterior, including siding, doors, windows, appurtenant structures such as decks and balconies, walkways and driveways;
• The roofing, plumbing systems, electrical systems, heating and air conditioning systems;
• All interiors; and
• All insulation and ventilation systems, as well as fireplaces and solid fuel burning appliances.

Every month ForeclosureRadar.com releases a foreclosure report showing foreclosure activity.

Click here to view the report.