Conforming Christian Mortgage Loans
There are many benefits to conforming Christian mortgage loans over a subprime home financing package or a jumbo lending contract. These types of loans are aptly named, as they conform to the standards of the organization that regulates lending practices in the United States. This organization is called the GSE, Government Sponsored Enterprise. The Government Sponsored Enterprise sets rules for banks to stimulate and protect lending in three areas: education, agriculture and housing. The GSE is made up of financial professionals who know the industry and can help provide quick and easy loans for those who truly need them. By setting a standard of rules to identify a lending package that qualifies as a safe financing venture, a bank could feel comfortable lending to individuals in situations that followed the rules and regulations. In this way, the economy is stimulated and borrowers are finding it easier to get the much needed funding for their homes. "Give to him that asketh thee, and from him that would borrow of thee turn not thou away." (Matthew 5:42)
The Government Sponsored Enterprise started out helping farmers get farm loans. They voted on a standard by which to judge healthy and unhealthy farm loans. Then the lender could loan the farmer money with little reservation. The farmer appreciated it, as they did not have to jump through a million financial hoops to get a loan. The GSE also helps stimulate the education loan industry. By following objective regulations, a lender can remain impartial and have a gauge as to the health of a particular lending package. Though Government Sponsored Enterprise has done great things for both of these fields of lending, the house financing arena has truly benefitted most from its oversight and regulations. Defining a conforming mortgage loan can help a banking professional distinguish wise and unwise investments from the ocean of loan applications sitting on his desk.
This kind of regulation helps the borrower too. The main reason a loan does not qualify to be a conforming mortgage loan is that the amount the borrower wants to finance is above the allowable amount. When defining a conforming mortgage loan, the GSE only allows the borrower to finance a certain amount over the average cost of a house in the United States. If the borrower is a multi-millionaire, that is fine. The jumbo finance market, the market sector handling loans too great to conform, is still a thriving industry. However, the discovery that the loan exceeds the standard allowable amount may cause the borrower a moment to pause and reflect on the wisdom of such a sizable loan. It also gives the banking professional a viable reason for not financing the home purchase, regardless of the income and credit history of the borrower.
The GSE does not insure the loans, so a lending package that conforms to the criteria is not completely secured financing, but much research and expertise has gone into the regulations governing the lending practices, so at least the lender knows that it is wiser to finance a conforming mortgage loan than jumbo loans. These regulations do not just benefit the lender, however. By regulating the debt to income ratio, the Government Sponsored Enterprise has also protected potential borrowers from predatory lenders. What are predatory lenders? They are banking professionals who garner commissions from the loans they make. The reason commission based lending is a bad idea is that the lending officer is tempted to lend money to people who do not have the ability to pay it back. The borrower's credit will be ruined, but the financial professional still gets the commission check. By regulating the acceptable debt to income ratio, the Government Sponsored Enterprise makes sure that, at least in theory, the borrower is able to make the monthly payments of the lending package they are approved for.
Each year another team of financial professionals called the Office of Federal Housing Enterprise Oversight or, OFHEO, determines the greatest amount that will qualify to be a conforming mortgage loan. This is decided each year, because the housing market, the economy and the average income all change and fluctuate. This means that once a year, financial professionals have a concrete number by which to determine if a lending package is a conforming mortgage loan or not. Banks approve jumbo loans all the time, but the financial institution cannot benefit from the oversight and aide of the GSE on a jumbo lending package.
Most banks make more money selling their loans to investors on Wall Street, than from homeowners' monthly house payments. According to the GSE's research and experience, it is easier to get an investor to buy a lending package that conforms with the regulations than a jumbo lending package. So, banks really take the Government Sponsored Enterprise's advice very seriously. So do investors. Borrowers notice the ease of qualifying for a conforming mortgage loan, because the Government Sponsored Enterprise board is already backing it, and the bank is already comfortable lending money toward a lending agreement that has governmental oversight and the ability to be sold for cash on the dollar. If a borrower has an income that is at least three times the amount of the house, and the house costs less than the defined jumbo amount, the lender will work with the borrower to move the application process through quickly. If these two criteria are not met, then the lending package is not a advisable by the GSE, and the bank may be hesitant or even refuse to proceed with the lending arrangement.
Christian Mortgage Loan BrokerA wise investor will hire a mortgage loan broker to find the most competitive loan rates and terms available before he purchases his new home. Originally, banks offered their own financial lending products, but as the lending industry got more competitive using a third party arbitrator or negotiator got to be more popular in countries like the United States, the United Kingdom and New Zealand. Now these types of liaisons are a major distributor of lending products to both individuals and businesses.
The scope and capabilities of a mortgage loan broker depends a lot on the state and country regulatory statutes. There are still laws that lending professionals have to comply with, similar to the regulations overseeing banks and credit unions. First and foremost, lending brokers are business people who need to make a profit. They perform extensive marketing campaigns trying to locate and attract new clients. A brokerage professional will assess the new client's capability of obtaining and paying the house loan payments. This will involve running the client's credit report and reviewing their monthly expenses and debt to determine her eligibility for a line of credit and ability to pay the monthly payments. The lending professional then searches the market to find the lending tool most suitable to his client's needs. Once the appropriate lender is located, the mortgage loan broker will then apply, on his client's behalf, for preapproval of the lien. After filing that, the mortgage brokerage professional will gather all needed information from the client; like: pay stubs, utility bills, credit card statements and bank statements.
In the United States, a mortgage loan broker does business under 10 federal laws and 5 federal agencies. These laws and agencies make sure that there are fair business practices within the industry. They also protect consumers against predatory brokerage practices. Predatory practices discouraged by these laws and agencies include: inflating the appraisal amount of the house, encouraging a financing option that does not benefit the borrower or somehow profiting from a consumer's lack of knowledge of the lending industry. These agencies make sure that the brokerage industry does not lead the consumer's astray, just to make the profit from the fees or interest rates. These guidelines insure that the brokerage professionals are always working for the borrowers' best interests.
There are a few differences between a mortgage loan broker and a loan officer working at a standard lending institution. These differences translate into benefits to the prospective borrower. A lending professional generally works directly for a lending institution. As a result, she will always promote the lending tools of that particular institution, even if another lending institution has a tool better suited for that specific client. On the other hand, a brokerage professional is a go between, connecting a borrower with the appropriate lender for her specific needs. A brokerage professional is privately licensed through the state in which he conducts business. A lending professional, on the other hand is covered under the umbrella of the institution's business lending license. As a result, the brokerage professional is held personally responsible for fraud or predatory activity.
Therefore, a lending professional does not have a personal reason to avoid predatory lending practices, outside of losing a job. However, a mortgage loan broker could lose his license, be fined and even go to jail if he engages in predatory tactics to close the loan. This is not to say that lending professionals are somehow dishonest or not held accountable. It is to merely show that though brokers work outside of the standard lending industry, they are still held responsible for making professional, honest decisions. Brokerage professionals typically make more profit from each transaction, but a lending professional from a financial institution has access to more clients, so can make more loans.
A standard lender can also access the secondary market, as a mortgage loan broker cannot. This means that a banker can temporarily offer a short term loan (warehouse lending) to a borrower, and then can sell the entire mortgage to an investor on Wall Street. At the time of sale, the bank repays their own lending institution and still retains a profit. Banks sell these loans in bundles, so that they are not financially hindered by smaller or riskier loans. Because a broker does not have this capability, they often have to be pickier in their choice of lenders. Another difference is that brokers have to disclose the yield spread premium, and bankers do not. For the average borrower, this is often hard to decipher, as the brokerage professional's paperwork might give the impression that the mortgage is costing more, when really the broker is simply disclosing more about the fees than the bank.
This is not to insinuate that a Christian mortgage loan broker is more honest than a lending professional, as the disclosure only comes by compulsion of the federal government. "Let integrity and uprightness preserve me; for I wait on thee." (Psalm 25:21) Brokerage professionals are working hard with congress to get the disclosure laws universalized across the industries to make a fairer playing field. With all the guidelines and federal regulatory systems in place, a potential borrower would be well served to shop around for a good brokerage professional. With the ample information available, a consumer can choose to employ a brokerage professional to search for the best lending tool, or could feel free to investigate for herself. Either way, the federal government has rules in place to protect the customer, regardless of their choice for a lending or brokerage professional to assist in their home purchase.