Finding a Mortgage on the Professor's Certified Lender
Since 1998, the professor has counseled over 25,000 mortgage borrowers on how to keep from getting ripped off and how to make critical decisions. Recently, he decided that his counsel could be substantially improved, and more borrowers could be reached, if he created a network of lenders that was directed to these objectives. The resulting Certified Lender Network (CLN):
Generates competitive prices to borrowers while shielding them from the various tricks of the mortgage banking trade.
Helps borrowers make the right decisions by providing the best possible decision support.
The CLN features discussed below
are all designed to further these objectives.
Borrower Access to
Lender Prices and Underwriting Rules
Most of the tricks used to
extract higher prices from borrowers are based on the loan
originator (LO, the loan officer or mortgage broker)
intermediating in the pricing process. Prices go from the
lender’s pricing system to the LO to the borrower. This
allows pricing discretion by the LO, which is what has made
the home mortgage market a type of bazaar.
Borrowers can’t be placed in the wrong price niche because the borrower always has access to the correct niche-specific price.
Changes in the market price prior to lock cannot be misrepresented because the borrower has access to the correct market prices, and can monitor them until the loan is locked.
Loan fees cannot be discovered that were not there earlier, because the borrower can see the fees.
A 7-Step Process In the Correct Order For Meeting Borrower Needs
In finding a mortgage on the CLN, borrowers do not
begin by selecting a lender. That is step 5 of a process
that prepares the borrower for it. At step 5, borrowers have
decided how much help they want in negotiating the process,
have qualified themselves, and know the type of mortgage and
the combination of interest rate and lender fees that they
Borrowers select from alternative paths based on their need for help.
Borrowers qualify themselves to determine whether or not to proceed.
Borrowers select the type of mortgage that best meets their needs.
Borrowers select the combination of interest rate and lender fees that best meets their needs.
Borrowers select the lender.
- Borrowers monitor the price of their loan
until it is locked.
- Borrowers check the prices of title insurance
and mortgage insurance quoted by insurers selected by
the lender against the prices posted by the insurers on
Different Paths For Borrowers
With Different Needs
Borrowers vary greatly in their knowledge of
mortgages, their interest in learning more, and their
competence in navigating web sites. To meet diverse needs,
the professor provides multiple paths from which users may
- Full Path with Automated Guidance:
This 7-step path is for the majority of borrowers who
want help and can navigate through automated decision
support on their own.
- Fast Path: This 6-step
path is for borrowers who know they qualify but in other
respects want the full automated decision support.
- Faster Path: This 5-step
path is for borrowers who know they qualify and know the
type of mortgage they want, but in other respects want
the full automated decision support.
- Guided Path: This path is for borrowers who want their hand held by an expert as they go through the 7-step process. They can join a group free of charge, or pay for one-on-one support.
Borrowers Can Qualify Themselves
Borrowers can reduce uncertainty
on whether or not they qualify before investing any more
time in the process. The analysis covers the three core
History of bankruptcy and foreclosure.
Credit score and down payment.
Ratios of borrower income to expense.
The analysis is
not conclusive, an underwriter always makes the final
decision. However, it is accurate enough to alert borrowers
who have no chance of being approved that they would do well
to spend their time improving their credentials. In such
cases, help is offered that is geared to specific
weaknesses. Borrowers who are close to qualifying on one
side or the other are shown exactly how close they are.
For more detail on
the CLN qualification process, see
Can You Qualify in Today's Market? Introducing the
Professor's Mortgage Qualification Tool
Mortgage borrowers often make bad decisions
regarding the type of mortgage they want, and the best
combination of interest rate and fees on the selected type
of mortgage. Borrowers approach these decisions with a
built-in bias toward the short-term, specifically the
initial payment and required cash outlays, and tend to
ignore longer-term impacts on their wealth. The process
reinforces the bias, rather than countering it.
- Borrowers are forced to make these decisions
together, which is often confusing.
- Borrowers do not have access to information
that bears on long-run impacts on wealth.
- LOs are primarily motivated to get deals done
and prefer not to raise issues that could complicate and
delay the process, even if they were qualified to do so,
which many if not most are not.
The CLN, in contrast, prods borrowers to confront
and possibly over-rule the biases they bring to the process.
- The decision process is broken down into
discrete steps. Borrowers first select the type of
mortgage, then the interest rate and fee combination on
that type of mortgage, and only then do they select the
- At the first 2 decision steps, for each of the
options from which a selection is being made, CLN
provides a personalized measure of the impact on wealth
over the period the borrower expects to have the
mortgage. The professor calls this measure the “Time
Horizon Cost”, or THC. It equals:
Upfront Cash Payments
Monthly Payments of Principal, Interest and Mortgage Insurance
Lost Interest on All Payments at the Borrower’s Opportunity Cost
Tax Savings at the Borrower’s Tax Rate
Reduction in the Loan Balance
- The counselors available on the CLN are all
qualified to guide borrowers who opt for help.
For more detail on how borrowers select their preferred mortgage type and rate/fee combination on the CLN, see Integrated Calculators Ease the Pain of Making Difficult Mortgage Decisions.
Shop For Mortgage Insurance and
The prevailing practice is for lenders to select the title insurer and mortgage insurer, even though the borrower pays the premiums. That is a major reasons why borrowers are over-charged. See Is Title Insurance Overpriced? and Mortgage Insurance in the Post-Crisis Market: Why Is the Market Rigged Against Mortgage Borrowers?
The CLN will change that. As a beginning, borrowers
using the CLN will have access to price quotes on title
insurance from Boston National, and on
mortgage insurance from MGIC. If the prices posted here are
lower than those charged by the insurer selected by your
lender, you can instruct the lender to obtain your insurance
from Boston National and/or MGIC.
Lenders offering loans on the
professor’s network are certified as CNLs, which means that
they conform to the following rules and principles:
CNLs Transmit Their Prices and Underwriting Data to the Professor’s Network Electronically.
CNLs Must Disclose Complete Price Data, including all fixed-dollar fees and all features of ARMs that might affect future rate adjustments.
- CNLs can charge borrowers a maximum fee of
$295 to lock their loans, with the charge credited back
to the borrower at closing.
CNLs upon locking a loan must provide a lock confirmation statement that includes a specified list of loan features.
CNLs that do not lock immediately must lock at the price the lender would quote on the same day on the identical transaction to the borrower’s twin requesting a price quote.
CNLs that over-ride a price lock because a property appraisal alters the pricing must lower the price when the new appraisal calls for it.
CNLs who are responsible for failure to close within the lock period will extend the period at no cost to the borrower.
CNLs accept certified third party service providers listed on the site that have been selected by borrowers.
- CNLs will not give loan officers working with
clients on the professor’s network discretion to adjust
price, including lock fees
For more detail on CNL certification, see Why Shop Here: Certified Network Lenders..
Generating Quality Loan
The primary benefit of the CLN to participating lenders is that they receive quality loan prospects for which the rate of conversion into borrowers is high. The following features contribute to this:
- Unqualified borrowers weed themselves out.
- Borrowers who contact lenders have been
through a decision support process and know what they
- Borrowers are confident that the lender they
select can’t give them a fast shuffle.
- Borrowers select a single lender.
A high conversion rate lowers lender origination
costs, and because the CLN is competitive, the savings will
be passed on to borrowers.