Since I began fielding questions about mortgages in 1998, I have been frustrated by my inability to answer one question in particular, which gets thrown at me all the time. The question is "Can I trust [name of mortgage lender]?" A variant is "Where can I go to find out about [name of mortgage lender]?"
The Need For a Certification Process
Many potential borrowers are shocked to discover that there is no registry of bad apples, and no system to certify good ones. So I finally decided to start a certification system of my own. I call the lenders who are certified Upfront Mortgage Lenders, or UMLs. For a number of reasons having to do with my capacity to monitor lender performance, the certification process applies to internet-based lending only.
The central requirement to be a UML is that borrowers are able to price their particular deals on the site. A set of generic prices does not qualify, and neither does a site where the borrower must go through a loan officer to get prices.
A site may require the user to input personal information, such as credit score or income, before it will return prices, but it cannot require the user’s name, SSN or other identifying information. Users can shop UMLs without fear of being solicited.
No lender prices every market niche on-line, but a UML prices some, and is upfront in disclosing which niches it prices on-line and which ones it doesn’t.
Being able to price a deal means having all the price components, not just the rate. This includes mortgage insurance and all the price components of piggyback seconds, where these arise. On ARMs, it includes the index, margin, rate caps, recast period, negative amortization caps, and maximum and minimum rates.
A UML is not necessarily the lender with the lowest interest rate, the fastest processing, or the most complete product line. At a future time, these and other factors might be included. Right now, however, certification is directed solely to the provision of the information that borrowers need to make informed decisions; and to assurance of fair treatment after shoppers have become applicants and committed themselves to the lender.
The requirements to be a UML are listed in Introducing: Upfront Mortgage Lenders.
UMLs Superceded by Certified Network Lenders
Short of developing my own network, UML certification was the best approach I could come up with for leveling the paying field between mortgage lenders and borrowers. In January, 2012, however, I finally unveiled my own lender network. Instead of having to visit each UML site to compile pricing data, the data from all Certified Network Lenders is combined on this site for the convenience of shoppers, who are guaranteed competitive prices and provided with decision support at each step of the way. Such support is not available with UMLs (or UMBs). See Finding a Mortgage on the Professor's Certified Lender Network.