February 23, 2024

Mortgages: Mortgages

A goal of the bureau — created in 2010 as part of the Dodd-Frank financial reform legislation — is to help protect consumers from risky loans by watching for violations of mortgage disclosure laws and other issues. (The agency also scrutinizes credit-card practices, payday lenders and credit bureaus.)

There are many other places that allow borrowers to lodge complaints or seek recourse, of course. There are various government agencies, from the Department of Housing to state banking departments. Consumers can also contact a lender’s customer service department. The Mortgage Bankers Association’s Home Loan Learning Center site provides a long list of appropriate agencies.

But to avoid any potential missteps from the outset, industry experts urge borrowers to choose their lenders carefully.

“Decide ahead of time who you want to work with,” by checking online reviews and referrals from friends or family members, said Angie Hicks, the founder and chief marketing officer of Indianapolis-based Angie’s List, which has a million members on its consumer referral and ratings site.

Mrs. Hicks suggests talking with several loan professionals, then getting as many loan details as possible in writing. Choose someone who will explain the process thoroughly, and be responsible.

Russell Tucker, a senior vice president of Investors Home Mortgage in Short Hills, N.J., has another suggestion: ask for a cellphone number. If the loan officer refuses, that could be an indication that he or she may not be readily available through the process, he said.

Financial services companies, which include the mortgage lenders, generated the greatest number of complaints to the Better Business Bureau of Metropolitan New York in 2010, the last year for which data was available. (They were followed by publishing and communications and automotive companies.) The bureau put the total number of complaints against financial companies at 11,224 in 2010, 48 percent higher than in 2009.

Not surprisingly, many complaints involved loan modifications, according to Claire Rosenzweig, the president and chief executive of the Better Business Bureau of Metro New York, and more specifically, the length of time it took to complete one. Some people have endured waits of six months, according to the bureau.

Anna Orkin, the local bureau’s manager of information and investigations, said she was told of loan officers who asked for the same information again and again, or did not respond to repeated phone calls or e-mails. One way to minimize this problem is to send over documents via certified mail with return receipt requested, and to keep copies — just in case.

Michael McHugh, the president of the Empire State Mortgage Banking Association, said lenders were dealing with a “tremendous volume” of troubled loans. He also said other transactions had been delayed, citing some refinancings that have taken up to 120 days to close.

To make matters worse, most mortgage lenders are no longer hiring extra workers to help out, added Mr. Tucker of Investors Home Mortgage; the practice was routine during boom years.

Ms. Rosenzweig says the Better Business Bureau will sometimes intervene on behalf of consumers, if the complaint is against a member lender.

The Consumer Financial Protection Bureau, meanwhile, says that complaints against financial institutions can be made online, via letter or fax, or through its toll-free number, (855) 411-2372. They are forwarded to the lender for review and resolution within 60 days, for “all but the most complicated complaints,” according to a statement on the bureau site. 

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DealBook: Wells Fargo Profit Jumps 48%

Noah Berger/Bloomberg News

Wells Fargo, the nation’s biggest retail bank, posted record first-quarter profit on Wednesday of $3.8 billion, a 48 percent increase from the period a year earlier, even as it contended with industrywide problems including a slowdown in mortgage lending and the costs of cleaning up the foreclosure mess.

The bank beat analysts’ estimates by a penny, reporting earnings of 67 cents a share in the quarter. That compared with profit of $2.6 billion, or 45 cents a share, in the period a year earlier.

Wells Fargo reduced the amount set aside to cover future loan losses by $3 billion at the same time as its pile of bad loans decreased. The move helped offset a drop in revenue, which fell 5.2 percent, to $20.3 billion, as a mortgage refinancing boom tapered off amid rising rates. Home mortgage originations fell to $84 billion from $128 billion in the final quarter of 2010.

Although losses are easing and corporate lending has picked up, Wells Fargo’s earnings were tempered by the same forces that weighed on the results of Citigroup, Bank of America and JPMorgan Chase. Sluggish consumer lending, the rising cost of servicing troubled mortgages and new financial regulations, like limits on credit card penalties and overdraft fees, have cut into earnings.

Competitors had big Wall Street businesses to make up for some of the missing income from traditional banking activities during the first quarter. But Wells Fargo, which is more heavily oriented to retail banking, could not rely on investment banking and trading profit to bolster the bottom line.

Nevertheless, Wells Fargo’s chairman and chief executive, John Stumpf, said he was pleased with the bank’s performance despite the “uneven recovery.”

“Our strong first-quarter results reflected positive trends in our business fundamentals as credit quality improved, capital ratios increased and cross-selling reached new highs,” he said in a statement.

Wells Fargo quietly emerged from the financial crisis as one of the nation’s strongest banks. After its takeover of the Wachovia Corporation in the fall of 2008, it has also become one of its largest consumer banks, with a large network of retail branches along both coasts. This spring, Wells Fargo converted computer systems and put up new signs on its branches in the New York metropolitan area.

Still, many analysts remain cautious. At a time when its rivals are betting on faster-growing overseas markets, some worry that Wells Fargo is too dependent on the United States recovery. In his statement, Mr. Stumpf acknowledged that while corporate lending activity was up, consumers remained hesitant to borrow.

Along with the slowdown in mortgage lending, Wells Fargo faces rising operating costs — especially in its loan servicing business after it reached a deal with federal regulators to increase staff levels and tighten oversight. Wells Fargo said its operating losses had increased $272 million, almost all related to additional money set aside for higher foreclosure-related matters and compensation.

Citigroup said it expected operating costs for its smaller servicing business to rise about $25 million to $30 million each quarter, and also planned to book as much as $50 million in additional charges related to the foreclosures. Bank of America said its expenses would increase, too. JPMorgan Chase said it took a one-time $1.1 billion charge related to the rising cost of foreclosures.

Like the other big banks, Wells Fargo may be required to buy back bad loans it sold to Fannie Mae, Freddie Mac and other private investors. In the first quarter, the bank set aside $249 million to cover future repurchases, after setting aside $464 million in the fourth quarter.

Still, the spill of red ink has slowed. Athough the housing market and broader economy remain fragile, Wells Fargo said it had released $1 billion from its loan loss reserves in the first three months of the year and expected to continue drawing down its reserves in the coming quarters.

Wells Fargo already had one of the biggest real estate portfolios of any bank. But with the Wachovia deal it absorbed more than $219 billion worth of commercial real estate and corporate loans — and a big book of at-risk mortgages.

“We continue to be optimistic about the improvements in credit quality and remain focused on managing through this cycle,” said Michael J. Loughlin, Wells Fargo’s chief risk officer.

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Mortgages: Nonbank Lenders Staging a Comeback

So-called nonbank lenders are trying to stage a comeback now, through two relatively new lobbying groups based in Washington that are seeking to burnish the image of those nonbank lenders that steered clear of risky lending.

While a few nonbank lenders still offer higher-risk loans with exorbitant rates, others, including stalwarts like LendingTree and Quicken Loans, sell plain-vanilla fixed-rate or adjustable-rate loans that are marginally cheaper than those from big banks.

Many borrowers are suspicious of the loans offered by smaller, nonbank lenders. “Most consumers say, ‘Who are these people?’ but the fact is that these are mainstream loans with good pricing,” said Glen Corso, the managing director of the Community Mortgage Banking Project, a trade group of 43 nonbank lenders.

Some nonbank lenders say they are seeing a steady increase in business from middle-income borrowers who may be unable to get a loan elsewhere.

“So far this year, we’re up 15 to 20 percent in the total value of loans we make,” compared with last year, said David Wind, the president of Guaranteed Home Mortgage, a nonbank lender in White Plains, N.Y.

Mr. Wind said the average loan amount in the New York City area was $240,000, compared with $220,000 a year ago, an indication that higher-end customers were seeking out nonbank lenders amid tighter underwriting standards at the larger banks. Because nonbank lenders tend to be smaller and have lower operating costs, he said, they can offer rates that are 0.125 to 0.375 percentage points below those offered by major banks.

The nonbank lenders extend money through one of two methods: the lenders have a line of credit with big banks and funnel that money to consumers in the form of home loans, or they collect money from private investors to lend to consumers. (The most recent data from the Federal Financial Institutions Examination Council showed there were 914 nonbank lenders nationwide at the end of 2009.) 

It is the second category that borrowers need to be wary of, said Diane Thompson, a lawyer at the National Consumer Law Center, because the interest rates may be significantly higher.

Nonbank lenders with lines of credit from big banks often find themselves with the same tough underwriting standards as the banks, said Stephen Adamo, the president of Weichert Financial Services, a nonbank lender in Morris Plains, N.J.

Still, Mr. Wind admits that nonbank lenders still have a battered reputation among consumers to overcome. “There’s a tremendous image problem,” he said.

And the new Consumer Financial Protection Bureau has made regulation and oversight of nonbank lenders a priority.

Enter the Community Mortgage Banking Project and Community Mortgage Lenders of America, both created in 2009 to promote the interest of nonbank lenders. “Nonbank lenders don’t have the name recognition of a Wells Fargo or a Bank of America, so they have to compete on price,” Mr. Corso said.

He said that contrary to popular belief many nonbank lenders these days do not offer subprime or other risky loans, and instead were offering conventional mortgages or loans backed by insurance from the Federal Housing Administration.

But Ms. Thompson advised home buyers, especially those who aren’t inclined to comparison shop or read the fine print in lending disclosures, to stick with a bricks-and-mortar bank. “There’s a long track record which indicates that this is where consumers will get the best deal,” she said.

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