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Most people really have no clue how many or who has access to their home loan when they get one.  So we will take you through the steps of the process and give you some insight.   Once you know how it works you will be astonished to find that there are so many people involved that it leaves room for error and illegal activity.  The number of people involved has to do with where you go to get your loan.  There are 3 primary retail types, DRE Brokers, CFL Brokers, and Banks. Each retail type loan starts with a borrower contacting a Loan Officer.  That loan officer can work for a DRE Broker, CFL Broker, or a Bank.  As a borrower you will fill out a Loan Application which is known as a 1003.  You will also fill out a Borrowers Authorization which gives the Broker permission to pull your credit and permission to shop with wholesale lenders for a loan.  Basically the Loan Officer is a sales person who is selling you money. 

Once your credit has been pulled and the loan officer collects basic information about your income the loan is then shopped.  That means that the loan officer has to call on the phone all the wholesale lenders that the Broker is qualified to business with.  If that broker is a DRE brokerage, that may only be a handful of wholesale lenders.  If that broker is a CFL brokerage, it could be hundreds.  As a borrower, who one is going to have access to the best loan program for you DRE or CFL? 

Next the loan goes to the Broker’s Processor.  This person is responsible for coordinating the transaction.  The Processor will then order a Title Report from the Title Company, open an Escrow Account with the Escrow Officer, order an Appraisal from the Appraiser, contact the Real Estate Agent for a copy of the purchase contract if it is a purchase, generate the standard state and federal disclosure package, lock the loan with the Wholesale Lender’s Lock Desk, generate the Truth In Lending and Good Faith Estimate within 3 days of the loan application or credit pull (whichever is older), collect documents from the borrower.  Once the Processor gets a clear to close from the Lender’s Underwriter that the loan is ready to be funded, the Processor will then coordinate with the Loan Officer, the Borrower, the Title Company, the Escrow Company, Real Estate Agent, and the Lender on a funding date. 

So to make this easy, below we have broken it out into a list of roles of the people involved in a purchase transaction.  These are not all of them but are the most common. 

1. Buyer / Borrower
2. Loan Officer’s Company – Commission Based – Paid Only If Deal Closes
3. Loan Officer’s Broker – Commission Based – Paid Only If Deal Closes
4. Loan Officer – Commission Based – Paid Only If Deal Closes
5. Loan Broker’s Processor – Per Closed Loan Fee – Paid Only If Deal Closes
6. Loan Broker’s Compliance Department – Only CFL Brokers have adopted this – Flat File Fee – Paid Only If Deal Closes 
7. Wholesale Lender Company – Commission Based – Paid Only If Deal Closes
8. Wholesale Lender’s Account Executive – Commission Based – Paid Only If Deal Closes
9. Wholesale Lender’s Underwriter – Base plus Commission  – Paid Only If Deal Closes
10. Buyer’s Agent – Commission Based – Paid Only If Deal Closes
11. Buyer’s Broker – Commission Based – Paid Only If Deal Closes
12. Broker’s Transaction Coordinator – Base Pay plus Commission  – Paid Only If Deal Closes
13. Home Inspector (1 – several)  – Flat Fee Paid - Up Front
14. Appraisal Company  – Flat Fee Paid - Up Front 
15. Appraiser  – Flat Fee Paid - Up Front
16. Title Insurance Company – Commission Based  – Paid Only If Deal Closes
17. Title Insurance Company Sales Representative – Commission Based  – Paid Only If Deal Closes
18. Escrow Company  – Paid Only If Deal Closes
19. Escrow Officer  – Commission Based – Paid Only If Deal Closes
20. Home Warranty Company  – Flat Fee Paid – Paid Only If Deal Closes
21. Seller – Paid Only If Deal Closes
22. Seller’s Listing Company  – Commission Based – Paid Only If Deal Closes
23. Seller’s Listing Broker – Commission Based – Paid Only If Deal Closes
24. Seller’s Listing Agent – Commission Based – Paid Only If Deal Closes

Out of 23 roles only 3 of them get paid up front and are not getting paid by a commission.  That means that if you have a ¾ of a million dollar transaction and it falls apart 20 different sides have a lot to loose.  Also if you take into consideration that DRE has to follow state guidelines and CFL has to follow state and federal guidelines.  It kind of makes you wonder if you want a DRE or a CFL broker doing your loan. 

So right now you are thinking, maybe I should just go to the bank to get my loan.  Well you can do that.  But the same loan you can get from the bank you can get from a CFL broker.  If you go to that one bank they are only going to give you the loans they have.  If you go to a CFL broker they can shop your loan with more wholesale lenders all at one time. 

You have to decide if you want to fill out a loan application and get your credit pulled at each individual bank you want to get a price from or do you want to let a CFL broker pull your credit once and shop it with a lot of lenders all at once and choose the option you want.  A DRE broker will shop the loan as a CFL broker will, however, it will be with a limited number of lenders that the broker has qualified with.  Then take into consideration that your DRE loan broker may also be your Listing and Buyer’s Agency.  They have a lot to loose when you are talking about 2% on the loan, plus 5% on the real estate transaction and add in the YSP they get from the lender which could range from a 1/16% to 3 to 4% more. 

If the transaction is $750,000 and the DRE group is doing the real estate and the loan sides with a total of 7%, they would loose about $52,500 on one transaction.  So if you look at that amount of money for one transaction wouldn’t it be safe to say they are at the biggest risk of loosing the most if the deal doesn’t close?  The next question is what do you think they would do to keep from loosing it?  Meaning, what lengths do you think they would go to in order to ensure that the deal closed? 

The appraiser makes a flat fee of about $450 to $600 per single family home appraisal.  The home inspector makes about the same.  A processor makes $650 to $850 per transaction and they do most of the work.  The lenders underwriter is responsible for checking the processor’s work before they agree to close the loan. 

Right now there is no quick fix for the condition of the market.  That is the truth!  But if we want to blame someone, look at the ones that made the most money during the boom.  It wasn’t Net Branch Companies, CFL Brokers.  So if you are looking to buy a property or get a loan don’t forget to ask who is involved and how much are they making.  You may be paying to much for that No Points No Fees loan.  Far too often people are told one thing but when they get to Title and Escrow to sign on the line everything has changed.  They are counting on you being too tired to not take the deal.  Be willing to walk away at the signing if the paperwork at signing doesn’t match what you were promised!  Otherwise you could windup with an over priced, unaffordable, and deadly loan. 

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