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About Doug Walker
Expertise
Fair and honest lending is my passion. I've been in full time in the mortgage business for 20 years as a loan officer, manager, owner, underwriter - and can probably handle most any question. I can help you save money on your next mortgage loan by explaining closing costs and identifying fair fees and "junk fees".
Experience
I have owned my own company as a broker and a banker, managed large production teams and have been a top producer in personal loan production. My experience includes all types of real estate lending: Conventional, FHA, VA, contruction and development loans. I currently work for one of the largest mortgage lenders in the nation and specialize in jumbo loans for private banking clients.
Education/Credentials
I have obtained mortgage and real estate licenses and have taken numerous continuing education courses. My certifications include underwriting authority for loans up to $1,000,000 and instructor for first time home buyer education courses.
Awards and Honors
President's Circle, Market Builder of the Year
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You are here: Experts > Shopping > Home Buying/Selling > Real Estate Home Mortgages > mortgage charge offs
Expert: Doug Walker - 10/23/2009
Question
Please help me....We are about to lose our home and have started the process of bankruptcy. We refinanced through a broker 6 months ago hoping it would help us keep out head above water until my husband could get a job. To make a long story short, I was contacted by our mortgage broker today asking my why we haven't made our payment. He explained that apparently he gave a guarantee of our stay to BOA to take our loan. We personally did not guarantee or sign anything to the effect. He is now telling me that I need to pay the back mortgage payments or else he will be charged $15,000 and have a loss charge off against him. Would you please tell me why this affects him at all and how if we do not pay the money, it will affect him in the future. He is a nice guy and all, but my attorney said it would be like me throwing $5K out the window at this point. Please help me understand this.
Thank you
Trisha
Answer
Hi Trisha,
I am sorry for your situation and I hope your husband finds work soon. You are certainly not alone. Your question is very valid and I will explain why you don't owe the money.
Your broker is being charged an "early pay default" fee. That amount is equal to the amount he was paid by Bank of America to place your loan with them. When a new loan goes into default within the first 4 months of the bank owning the loan, they will come back to the broker for a refund of the revenue they paid the broker when it closed. There is no legal recourse the broker has to come back to the borrower for reimbursement. You had no control over what he made and nothing in your note or other documents refer to this "pay back" clause. That is in the agreement between the broker and the bank who buys their loans.
Banks also charge brokers when the loan gets paid off within the same 4 month time period. When refinancing was more popular during the first part of this year, some loans were paid off very quickly when rates dropped .5% in a couple of months and the borrowers refinanced again.
Both of these fees are very hard to control and since we can't collect from the borrowers, it just becomes part of the cost of doing business. The company I work for funds over 500 loans per month and we have paid over $1,000,000 in these types of fees this year.
I feel bad for the broker. However, I don't know why he said he is being charged $15,000 - that seems quite high unless you have a very large loan, over $500,000. These fees for us average around $5,000. As far as his future goes - Bank of America will track the ratio of these defaulted loans compared with the total number of loans he places with them. If the ratio of defaulted loans is too high, they might cut him off from funding loans through them. He can still stay in the business and use other banks, or go be a loan officer for a company who takes these risks for him.
Another aspect of this is how he got the loan done for you in the first place. I don't know what kind of loan he arranged, but if the job situation was already in question when you applied for the loan, he should have been more careful putting the loan together. He also could have explained to you the result of an early default and been in contact with you during the last few months to see how things were going before it got to this point. We do that if we have reason to be concerned with new loans until we get past that 120 day period.
I hope all this helps and I wish you the best!
Doug
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