"Someone who is savvy enough in economics to think about how the interests of the bank might act as a safety net for their own loan is savvy enough to do their own reality check on whether or not taking on such a loan is a good idea in the first place"

Then wouldn't you think the banks and mortgage companies would have been savvy enough to do THEIR own reality checks on whether or not giving out "such loans" was a good idea in the first place? Or how about the underwriters who OKed the funding of these mortgages? Or the bond raters who gave bonds backed by mortgage bundles riddled with rotten loans higher ratings then they deserved?

Apparently not, even though all of the aforementioned employ hoards of financial wizards and economists who, one might naively think, should have known better.

"Someone who is savvy enough in economics to think about how the interests of the bank might act as a safety net for their own loan is savvy enough to do their own reality check on whether or not taking on such a loan is a good idea in the first place"

I don't think so. I think you can be very simple in your approach, and say, "the bank wouldn't loan me that money if they didn't think I could pay it back."

Oh and I seem to have forgotten to address the question that started this thread.

I don't think a bank should have a broad fiduciary duty to all of its customers, BUT I do think that bank and other lending institution loan officers who act in an intake capacity should have a fiduciary duty to those mortgage customers that they bring in.

That duty would include making these customers aware of all the loan programs offered by the lender for which they qualify and providing them with an objection analysis of the pros and cons of each type of loan. That would mean that the lender could not, as Countrywide notoriously did, secretly deliberately exclude favorable financial information from applicants files so as to disqualify them for more favorable loan offerings.

In the same vein, I also so creation of a fiduciary duty owed by independent mortgage brokers toward their customers. Among other things, it would require the brokers to disclose to each customer the terms of the various loan programs available from competing lenders and explain the pros and cons of each. That would prevent the brokers from steering customers to a lender who offer less favorable terms in return because in return fro a higher fee or kickback from that lender.

In other words, both the independent brokers and intake loan officers should be required to act in the borrower's best interest, not their own or that of their employer.

FF
Don't you think it is the customers responsibility to shop, should the car dealer be required to tell you the car down on the street or maybe another on his lot is higher rated by Consumer Reports?
How can a broker really know the competing terms unless it is underwritten?
Does anyone here shop for a mortgage?

"...the bank wouldn't loan me that money if they didn't think I could pay it back."

I 'thought' I'd heard about every reason on the planet for loans going delinquent...I've never heard that one. Or, at least no borrower has ever had the nerve to say that to my face?

Of course, if I'd acted in a presumed fiduciary capacity & told a young couple, "Hey, look, you qualify for $500K; but you're young & just starting your family. Kids are expensive so I'm not going to let you borrower all the way up to $500K...only $425K." Then, I'd still be sued for lender liability. Can't win.

The question was whether banks should act in a fiduciary capacity (trustee) to regular customers outside those who've requested those services through the Trust Department? I still say the answer is, "No!"

/tricia

Banks are a business, and like any business, their responsibility is to maximize profits and minimize costs better than the competition.

Buyer beware.

I always lurk in this area and just feel like I need to chime in. Please keep in mind that I am in Canada so we do differ in our regulation than in the States. But these are my thoughts.

Financial advisors/brokers have not only a fiduciary duty but also what's called "duty of care" not only to their firms, but also - and this is emphasized most importantly - to their clients.

A financial broker must generate enough commissions for his firm that it is/remains profitable, otherwise he is fired. At the same time, this same broker is prohibited by fiduciary duty & duty of care from churning his client accounts in order to produce said commissions. In effect, he has to keep his company happy with his production, while at the same time ensuring that his RECOMMENDATIONS are SUITABLE for his clients. That can be a tight walk sometimes, but it is the standard and a high one.

Why cannot these same standards apply to mortgage brokers? Clients seeking a mortgage are not just seeking a mortgage, but often need to be able to trust that the mortgage product being pushed on them is SUITABLE for them.

Just as in the investing industry, any solicited trades must be fully discussed with clients and this includes full disclosure on risk parameters for any trade. Full disclosure ensures that the client understands what they are getting into and can make an informed decision to go ahead or look at something else. I can't believe something similar is not possible/not feasible/not already done with mortgage representatives.

I dunno....I look at both industries and just see sooooo many similarities and just do not understand why they cannot be regulated similarly.

Lastly, I must say that I do not like government intervention/regulation. However, when you are talking dollar amounts like a mortgage, or your life savings, then yes - there needs to be regulations, rules, and standards. I want piece of mind that the person I am dealing with has met specific standards and knows what they are doing so they can explain certain facets that I may not understand.

The public cannot be experts at everything, or there would be no experts. There would also be NO legalized standards for fiduciary duty or duty of care since it wouldn't be necessary.

Very interesting question though Tricia, thanks for posting it.

DH and I are real estate agents and my BIL/SIL own a mortgage company. In my state- tomorrow they could hire a "mortgage broker" who could go out and sell mortgages with no license, no training, no responsbility to a customer. DH and I must be licensed, affliated with a company, take continuing ed classes, explain representation and fiduciary duty, and can be sued should we perform our jobs poorly. Not only that should a mortgage broker perform their job poorly for one of our clients the real estate agent can be sued for not "protecting" the buyer.

I don't see how employees of banks could be expected to owe fiducuary duty but mortgage brokers who are paid by commission working at one company which has access to several could easily be responsible for their actions in the way of fiduciary duty....

>>Financial advisors/brokers have not only a fiduciary duty but also what's called "duty of care" not only to their firms, but also - and this is emphasized most importantly - to their clients. Don't want to get OT here, but just so folks are aware, here in the US, CFPs are strictly licensed and have fiduciary responsibility to their clients.

Stockbrokers do NOT. They have what is called "suitability" requirements only. They can recommend stocks and funds to you that are not necessarily in your best interests, because they do not have fiduciary responsibility to their clients; e.g., they are not legally obligated to put the client's interests first.

I have to say I agree with triciae. I do not see how a bank can be expected to have fiduciary responsibilities to its customers except in very limited, specialized situations such as administering a trust.

My DH and I deal with his elderly mother, who is living with us. She comes from (literally) another time and place. When I happened to mention that Rice Krispies has absolutely no redeeming nutritive value, SHE WAS SHOCKED! She asked us, "Well, how they can be allowed to sell it?!?" She honestly does not understand capitalism, or a world in which a handshake and smile are not sufficient protection against fraud/crime/greed.

I think many people got stampeded into the "buy it now on cheap interest" frenzy for the same reason we got pressured into buying our cottage in 1989 during the last RE bubble. We were dumb and paid for painfully for a good ten years afterwards.

Now we're doing well and even taking early retirement. But our own experiences are why I so firmly believe that financial education is a must for the younger generation these days. The world is a complex and difficult place, and just being able to run up a big score on a Wii game isn't going to help you get through life successfully.

IMO, it is more like a world where capitalism has become synonymous with fraud, crime and greed.

I'm not sure that it is still even possible any more to make extremely large sums of money by a method that is totally honest and ethical; as such, fraud and greed have become legalized under many guises...and when it comes to high finance, the word "crime" no longer means what it has been traditionally understood to mean.

After all...many of the "mortgage brokers" who defrauded and deceived buyers are now out of business...but I personally haven't heard a word about charges and/or indictments against them....
...that is because they would have to take down the hedge funds and most of Wall St. along with them

Bottom line...when huge money talks, the law looks the other way.

It took a while but indictments & convictions did happen in the Enron, WorldCom, & other big fraud debacles.

Colorado has been actively prosecuting REAs, appraisers, mortgage brokers, & HI in the past year for fraud. The Denver Post has a special section of the paper devoted to coverage of the state's real estate fraud.

Angelo Mazilo is now under an informal SEC investigation for his supposedly "regularily scheduled" stock sales along with half a dozen others.

You're right though, if I may make a broad generalization, the scum always seems to rise to the surface.

IMO, somebody will end up taking the fall as "bad guy" for the mortgage mess...probably, a mortgage banking company (AHM or CFC?). Congress will need to say they "punished" somebody. Hundreds of others who are guilty will get "Get Out Of Jail Free" cards.

Again generalizing, there is a lot of support for the "too big to fail" attitude though.

There's a banking saying that goes like this, "If you owe the bank $1K, they own you. If you owe the bank $100M, you own them." There's also a lot of truth to that saying. I wouldn't be surprised if that's partly what was behind BAC's $1B bailout to CFC.

/tricia

Oops, that should have been "BAC's $2B bailout for CFC".

/t

"Don't you think it is the customers responsibility to shop, should the car dealer be required to tell you the car down on the street or maybe another on his lot is higher rated by Consumer Reports?"

Rather obviously, the car dealer is selling his own wares. A mortgage broker isn't. So your analogy breaks down.

Borrowers can shop for a mortgage if they choose. That's what I've always done, and it's far easier to do now that so much more info is available online. But if, instead, I engaged a mortgage broker to find me the best deal, then that's what I would expect him/her to do.

I wouldn't expect him to steer me into a subprime mortgage, for example, when I qualified for a conventional because he happened to make a higher fee on it. Yet, that's what many brokers and loan officers at mortgage companies did. I understand that followup studies on recent subprime borrowers has shown that about a third of them actually could have qualified for conventional loans.

FF, if ones shops for a mtg, the broker trying to sell you a subprime, when you qualify for a prime will will blown out of the water with your other offers. Comparison shopping will show you that, they will lose out on the bidding process and learn they better make the best offer.

Hi FF,

I do think that bank and other lending institution loan officers who act in an intake capacity should have a fiduciary duty to those mortgage customers that they bring in.
That duty would include making these customers aware of all the loan programs offered by the lender for which they qualify and providing them with an objection analysis of the pros and cons of each type of loan.

One question dear; WHO is to PAY for the time & resources this will take?

NOTE; Any particular applicant that shows up at my door (or website) *MAY* potentially qualify for literally THOUSANDS of different options I may be able to originate for them.

Because I am an experienced professional, in moments of careful interview I can eliminate massive swaths of inappropriate programs. We don't even have to take the time to confirm actual qualification on but perhaps 1, 2 or maybe 3 options.

Merely in order to DETERMINE beyond a doubt whether an applicant will qualify for a particular program may take from a few hours to several days. Multiply that by your theoretical "all programs offered" and its just silly.

I propose that what you WISH to be able to do is rely on the actual professional themselves... and this is the same issue as anyone seeking the professional assistance from an attorney, a physician, etc.

Its simply unrealistic to try to mandate that everyone has to go through the equivalent of medical school to gain the necessary knowledge before they are allowed to use the services of a physician.

In the same vein, I also so creation of a fiduciary duty owed by independent mortgage brokers toward their customers.

This is perfectly fine be ME, personally, as it would dramatically eliminate competition and significantly increase profit margins... but I suspect you are ignoring the realities and uninteded consequences of your wishes.

Among other things, it would require the brokers to disclose to each customer the terms of the various loan programs available from competing lenders and explain the pros and cons of each.

How do you propose to "stop time" in order for this to occur?

That would prevent the brokers from steering customers to a lender who offer less favorable terms in return because in return fro a higher fee or kickback from that lender.

No it wouldn't... not at all! It would merely add more complicated and ignored disclosure (which would be circumvented even if it was possible to execute,) after which the loan officers would then take the babbling/entranced customer and place them into whatever the loan officer deems appropriate anyway.

In other words, both the independent brokers and intake loan officers should be required to act in the borrower's best interest, not their own or that of their employer.

MUCH simpler done; Simply require loan officers to operate in the same business models that atorneys operate, and to the same rigorous (and extremely expensive to administer) oversight standards.

ONE PROBLEM: The $300,000 mortgage you used to be able to get for a total of $5,000+/- in lending fees will now cost $30-50,000.

THat's why it will never happen.

Cheers,
Dave Donhoff
Strategic Equity & Mortgage Planner

Hi FF,

Rather obviously, the car dealer is selling his own wares. A mortgage broker isn't. So your analogy breaks down.

ACTUALLY, obviously, NO.... a mortgage broker *IS INDEED* selling his own wares.

ALL a mortgage broker has to "sell" is his services. A mortgage broker provides many services that most banks do not... not the least importantly is the experienced service of managing multiple sources of wholesale programs and ancillary services.

THIS can certainly be shopped... just as anyone would "shop" their litigator, surgeon, or any other critical professional.

Treat the process with less respect, and you get what you bargained for.

I engaged a mortgage broker to find me the best deal, then that's what I would expect him/her to do. I wouldn't expect him to steer me into a subprime mortgage, for example, when I qualified for a conventional because he happened to make a higher fee on it. Yet, that's what many brokers and loan officers at mortgage companies did.

I provocatively propose that you are not even personally aware of the difference between a loan officer that works for a mortgage broker, and one that works for a mortgage banker.

I can garan-freakin-TEE you that the general public doesn't!

Do you have *any* idea which of the two distinctions I just named have been overwhelmingly prevalent at 'steering' into subprime loans? (Trick question with far too much obviousness in its asking...)

I understand that followup studies on recent subprime borrowers has shown that about a third of them actually could have qualified for conventional loans.

Sounds like they chose poorly... either their program, or their advisors.

Sad but true reality in life... happens in all walks.

Cheers,
Dave Donhoff
Strategic Equity & Mortgage Planner

Dave

"MUCH simpler done; Simply require loan officers to operate in the same business models that atorneys operate, and to the same rigorous (and extremely expensive to administer) oversight standards."

Uh, yeah. Attorneys owe a fiduciary duty to their clients to act in the client's best interests, not their own. Mortgage brokers, like real estate agents, should be held to the same standard.

And it's not that expensive to administer. Lawyers pay bar dues, part of which goes to maintain the grievance and disciplinary system. In my state, that amounts to $120/year/lawyer. Your claim that something similar would add 45K to the the cost of a mortgage is ludicrous.

I also don't understand your riff about the mortgage bank loan officers and the impossibility of them knowing all available mortgage programs. I meant, of course, that they should make their customers aware of all the current loan programs for which the customer qualifies which are offered by their own institution. Isn't it already an integral part of their job to know that? What is so difficult, time consuming or expensive to disclose this info to their customers?

The mortgage brokers can be expected to be aware of mortgage programs offered by a wide variety of lenders. No one can know everything, of course, but requiring a broker to inform the client "the terms of the various loan programs available from competing lenders and explain the pros and cons of each" doesn't mean they must search around forever to find the very best program in existence. Again, it's just part of a fiduciary duty that they put their clients' interests above their own and, should the most lucrative loan for the broker not be one that's most advantageous for the client, not steer the client into the loan that favors the broker.

I assume that's what you already do. You say "This is perfectly fine be ME, personally, as it would dramatically eliminate competition and significantly increase profit margins..." Well good! I'm glad we agree. That's what we all want isn't it? That brokers who do right by their clients will wind up on top.

Hi FF,

Some smartassed replies... but at the footer; yes, we're on the same intention page.

OK.... here we go;

And it's not that expensive to administer. Lawyers pay bar dues, part of which goes to maintain the grievance and disciplinary system. In my state, that amounts to $120/year/lawyer. Your claim that something similar would add 45K to the the cost of a mortgage is ludicrous.

STOP!

I realize you have no idea what it takes to stay on top of the mortgage environment and properly (with fiduciary care) guide a borrower client to a program of their best interests...

Simply imagine the fees that attorneys would run up if they were the ONLY providers allowed to originate loan financing. At $250/hour for the principal attorney, and anywhere from $85/hour to $175/hour for all the assistants that attorney delegates to...

MANY MANY MANY financing clients take MONTHS to properly navigate through their process...

STOP AND THINK... do the math (or simply try to imagine what the math would end up looking like.)

I also don't understand your riff about the mortgage bank loan officers and the impossibility of them knowing all available mortgage programs.

I already acknowledged you didn't understand the distinctions (but I thought I had teed it up sufficiently to give away the answer...)

I meant, of course, that they should make their customers aware of all the current loan programs for which the customer qualifies which are offered by their own institution.

AGAIN.... does this apply to ONLY retail bankers? Or are you asking that BROKERS be held to this as well?

If you are including brokers (who only sell their service, not the wholesale banker's loans,) are the brokers to make the customers (ahem "clients" if fiduciaries) aware of ALL POSSIBLE ACCESSIBLE programs available through ALL affiliated wholesale bnaking providers?

Again... who are you proposing is to pay for the time that this will take?

Isn't it already an integral part of their job to know that? What is so difficult, time consuming or expensive to disclose this info to their customers?

OK... you didn't read my prior post... that's the only way you could possibly be asking these questions.

The mortgage brokers can be expected to be aware of mortgage programs offered by a wide variety of lenders. No one can know everything, of course, but requiring a broker to inform the client "the terms of the various loan programs available from competing lenders and explain the pros and cons of each" doesn't mean they must search around forever to find the very best program in existence.

Are you backing off to merely "general, generic education"? This would be as meaningless & uselsess as teets on a bull.

Again, it's just part of a fiduciary duty that they put their clients' interests above their own and, should the most lucrative loan for the broker not be one that's most advantageous for the client, not steer the client into the loan that favors the broker.

There are currently two basic business models in banking;
A) Sell the services. This works from a fiduciary model if the provider gets paid regardless of the results. If the provider is at risk of getting stiffed if the client is unhappy with the rates... or merely decides not to buy the house... then this model fails.

B) Sell products. This is purely caveat emptor (buyer beware,) and the buyer's compensating weapon is the freedom to 'shop around & waste everyone's moeny/time.'

I would wholeheartedly embrace model #A... but it would require making the entire global banking industry turn on a dime... and even if the bankers didn't resist, the consumers demand the freedom to balk.

Ain't gonna happen, unfortunately...

I assume that's what you already do. You say "This is perfectly fine be ME, personally, as it would dramatically eliminate competition and significantly increase profit margins..." Well good! I'm glad we agree. That's what we all want isn't it? That brokers who do right by their clients will wind up on top.

Sure do... but it will never be successfully legislated.

The only way for it to happen, for an individual borrower, is for that borrower to do the diligence to find a providing professional that operates in that fashion.

You can EITHER shop the service professional,
OR you can shop the underlying product... but not both.

Cheers,
Dave Donhoff
Strategic Equity & Mortgage Planner

Ah yes, Dave, but you & I both know that consumers do want BOTH! lol

And, in my case as a banker, they also want free checking accounts & free checks, free ATMS, free cashier's checks, free traveler's checks, free overdraft protection, free notary service, plus evening & Saturday hours. And, if you're 1/8 point over some Internet quote...they flee. And, we are to now offer free fiduciary care as well? Shoot, even a not-for-profit credit union can't do all that & still pay the light bill.

/tricia

Oh, I forgot...they also want free checkbook balancing. Gads, you wouldn't believe how many people come into banks with their checkbooks in hand saying they've not balanced for five years &, for 'some' reason their balance is not in agreement with their statement! Yikes... Banks have to have staff just to figure these idiot's checkbooks out.

/t

"ONE PROBLEM: The $300,000 mortgage you used to be able to get for a total of $5,000+/- in lending fees will now cost $30-50,000.

THat's why it will never happen."

Finally! Someone said it. I think you may be exaggerating the increase, but I agree throwing ever-more attorneys into the transaction will only make it more expensive. Still, would it not realisticly be comparable to real estate transactions in which attorneys are already present? I've heard multiple times things like "that was the best $500 I've ever spent". I don't get where your $30,000 number comes from.

"And, we are to now offer free fiduciary care as well?"

Who said anything about it being free? From the beginning I've questioned what the unintended consequences would be, and an increase in fees is one of the more obvious ones.

"you wouldn't believe how many people come into banks with their checkbooks in hand saying they've not balanced for five years &, for 'some' reason their balance is not in agreement with their statement! Yikes... Banks have to have staff just to figure these idiot's checkbooks out."

That's the kind of customer that banks need to learn how to fire - *OR*, the bank needs to learn how to become their fiduciary and balance their checkbook for them.

I have an acquaintence who pays about $3000/year in fees to a trustee to manage his money - obviously, that kind of money is going to make this whole thread academic and disconnected from reality, but you know, I think I could manage to balance someone's checkbook (or decide if they can afford a particular mortgage) for a lot less than $3000.

If a real estate lawyer can work on a real estate closing for a one-time $500 or less, could not a bank trust officer do the same with the mortgage?

Heck, this could be a new source of positive cash flow for banks.

Actually, that's not a bad idea to run it through the Trust Department for those wishing a fiduciary relationship. In fact, that's a good enough idea I'm going to talk to DH & see if I get 'THE' look that he gives me when I say something stupid. :)

Lenders (including banks) would first have to educate the public on what a fiduciary relationship is & what it would mean to them as a consumer. I do question whether people would cough up an additional fee? There's a lot of folks out there today that really believe they can get the best mortgage loan on their own via the Internet. Dave & I both know that's not always the case but it's an uphill battle to convince the public. It's hard for a bank today to even get a customer in the office to speak with them face-to-face. Over half of DH's bank's mortgage loan applications come in over their website. That's a really tough way to develop any kind of relationship much less a fiduciary one. People today seem to want almost instant approval with as little effort on their part as possible. In order to meet basic fiduciary responsibilities it seems to me a Trust Officer would have to actually speak with a potential borrower to understand their situation & goals?

Still though, I'm going to talk to DH. It may be, what's known in the industry, as a 'value added' service a bank could offer to those willing to pay the fee & put forth the additional personal involvement.

/tricia

Hi mfbenson,

Still, would it not realisticly be comparable to real estate transactions in which attorneys are already present? I've heard multiple times things like "that was the best $500 I've ever spent". I don't get where your $30,000 number comes from.

If a real estate lawyer can work on a real estate closing for a one-time $500 or less, could not a bank trust officer do the same with the mortgage?

Your $500 is spent on maybe 30-90 minutes of a single professional's time, in an extremely standardized review process with very few (if any) adjustments or moving parts. It is, for the most part, simple review of standing boilerplate documents... that's it.

Mortgage origination, from the earliest stages through to final settlement and securitization, is many many multiples of that amount of time, and from a handful to several dozens of co-participants in the process.

If fiduciary burdens are regulatory laid upon all mortgage business, the fee increases won't stop at the loan officers... because no litigating attorney would EVER stop at just the loan officers when listing their predatory targetings... litigators will go after processors, underwriters, appraisers, title researchers/reviewers/underwriters/insurers, escrow agents, mortgage insurance underwriters, inspectors, legal document preparers, notaries, et. al.

As those positions carry greater risks, they will all demand greater fees in order to cover those risks.

TANSTAAFL (Google it!)

Cheers,
Dave Donhoff
Strategic Equity & Mortgage Planner

DH said that when HGTV has fiduciary duties he'll consider it.... :)

/tricia

I figured he'd say "ok, you need to stop spending time online with people that really don't know what they are talking about..." (that would be me. I can admit it...) Although, if he'd decided to go ahead with that kind of thing, I'd be kicking myself for not extracting a consulting fee... :)

"Mortgage origination, from the earliest stages through to final settlement and securitization, is many many multiples of that amount of time, and from a handful to several dozens of co-participants in the process."

Ok, but how the lender securitizes the mortgage isn't relevant to whether or not the borrower can afford the loan. If a trust officer limits his scope to the borrower's finances, is it really that much work?

Its not like a borrower does dozens of hours of work agonizing over what he or she can afford when taking out a loan and is now seeking to dump all that work on a trust officer. Its just that a borrower would be looking for someone with knowledge, and more importantly experience, to offer an informed opinion that is in the borrower's best interests.

"If fiduciary burdens are regulatory laid upon all mortgage business, the fee increases won't stop at the loan officers... because no litigating attorney would EVER stop at just the loan officers when listing their predatory targetings... litigators will go after processors, underwriters, appraisers, title researchers/reviewers/underwriters/insurers, escrow agents, mortgage insurance underwriters, inspectors, legal document preparers, notaries, et. al."

Hmm. Good point. Perhaps, as a bone thrown to the banking industry, Congress could attach to the same legislation that would require fiduciary duty in the first place some sort of legal liability limitations. That's probably asking too much. Plus, it could be abused by unethical lenders. Hmm. I may have to give up and concede defeat, but this has been a great thread. Very thought provoking.

I still don't understand why an adult seeking a loan can't figure out for him self, whether or not he can afford such a loan? Seems silly to think an adult can't read and understand the basic loan terms.

Gee, shouldn't EVERY bank jump on this one? It's another chance to charge a FEE!

Fees are cash cows for banks, according to an article by David Lazarus of the LA Times. (Story in Chicago Tribune Sunday Business section)

He quotes FDIC that 42% of banks' annual revenues last year were from non-interest income, dominated by fees. That's up from 34% ten years ago.

Overdraft fees are up 70% from 2004. The dollar amount of overdraft fees amounts to more than the actual $15.8 billion in the overdrafts themselves!

I've never figured out why anyone relies on ATM's -- concept stolen from casino slot machines?

The overdraft thing is really interesting. Is it bank-orchested, where electronic transfers between banks 'fail to register' in time to cover a customer's debits? Or are that many more people skating too close to the thin ice?

chisue,

People use their overdraft protection as 'payday loans'.

/tricia

I've never figured out why anyone relies on ATM's -- concept stolen from casino slot machines?

Now I'm getting confused what is wrong with relying on the use of an ATM machine?

Yea, what is wrong with Atm's? Most banks don't even charge you a fee going out of network, or reimburse you if the other bank charges you a fee

Bank of America raised their non-customer ATM fee to $3 back in July/August from $2. As the largest network of ATMs the move affects millions of people. Since 40%-60% of a bank's income is fee related you can be sure this gig will be coming to a theater near you soon...

/t

When people start realizing there are many banks that don't charge such fees, the banks that charge them will have to change their fee structure to maintain customers..
Commerce Bank refunds ANY fee from any bank that charges you for using their atms...
Fidelity Investments has recently started an account that lets you write checks, pays a very good interest rate,has online banking capabilites,and also refunds any fees charged by other banks for atm usage..

qdognj, are you referring to the Commerce Bank (CBH) that a couple weeks ago announced they were being purchased by the Canadian Toronto Dominion Bank? I 'think' they operate mostly in the mid-Atlantic (NY, NJ, Philly, DC, Maryland, maybe western CT).

If so, I wonder how the purchase will effect your ATM structure?

/tricia

yes, and i asked about that exact question last week, the answer was everything is status quo...But, we'll see about that,lol...If the fee structure changes, i'll move over my checking account to Fidelity Investments..The only issue some may find is the lack of brick and mortar for Fidelity, but i have an office with 15 miles..and i really don't go inside a bank ever anyway, so not a big deal for me..

There's nothing 'wrong' with using an ATM. I just haven't seen the advantage to me. I go through the bank drive-through probably three times a year and get some cash. (Should I worry about losing interest on that $200 in the kitchen drawer? Is my cash 'stale'? LOL)

I just see people hitting ATMs for some pretty small amounts, frequently. It takes time. You are very exposed. (Nobody thinks you'e there buying gumballs.) Increasingly there is a transaction fee.

We carry almost no cash. I charge everything; pay the balance monthly; get a year-end report from the CC company detaling where the money went! As the Visa TV commercial shows with it's 'waltz interrupted', you can charge just about anything. And I do!

How often do you all use an ATM? How much cash do you use?

chisue,

I don't use an ATM machine at all. My DH has taken me to the bank on numerous occassions to 'show' me how to use the money slot machine. I smile & listen politely & then never return. :) I also don't use my debit card that he so kindly arranged for me with 'special' features which I no longer even remember what those 'special' features are? :(

I like cash. Cash works everywhere I ever need to make purchases except online & there I use a CC. I have ONE CC especially for Internet use (it has additional Internet protections & can't be used anyplace EXCEPT online.)

I carry about $20 in my wallet unless I know I'm going shopping for something specific that requires more. I got in the habit of cash years ago as a way to control outlay & just never changed. Actually, it still stops impulse purchases like today at the grocery store...didn't have enough cash for a bag of the Halloween candy-corn things. :(

Don't get me wrong. I do use a CC when making very large purchases. I don't walk around with $5K in my purse.

DH will use the bank's ATMs randomly during the week as a system & service check. I think he does it about once/month?

I, probably, go through about $1K/month in cash.

/t

My bank, BofA, has ATM's everywhere, my closest is across the street from my house, I walk over there sometimes to get cash, I use it mostly for tipping and paying my housecleaner.
I never use my debit card, I don't understand why some value them. I do charge or cash, mostly charge.
I don't pay a fee for my ATM use. Sometimes I walk to Jamba Juice, I can charge it but more often I just like to pay cash, okay I go there alot. Too much.

Seldom, if ever, do i use cash...We pay EVERYTHING on credit, and pay it off fully each month...

Thanks for the smiles! Tricia, can't you just get out there in the countryside with a teeny tractor and reaper and harvest the candy corn? Isn't that where it comes from?

cmarlin -- You are not alone. I see tons of people around the Jama Juice shops when we're on Maui. I used to love those whipped OJ and egg creations at Orange Julius -- same thing?

Hi mfbenson,

If a trust officer limits his scope to the borrower's finances, is it really that much work?

Not at all... if that's strictly the limited requirement. In such a case, we could make it much cleaner by simply requiring everyone who wants to borrow money to get a "borrower's license" the way you have to get a driver's license.

Minimum required education, pass a test... and when you want to borrow money you are required to pay for a 1 hour session with a fiduciary financial leverage planner.

If the advice the planner gives you is bad, they are held responsible. If you proceed in a manner contrary to the registered advice of the planner, you're on your own.

All the regulatory & admin BS is paid by the fees charged for said BS... works cleanly, no additional taxes. In fact, the reduced court burdens may SAVE money (though predatory litigators would lose out.... bummer....)

Cheers,
Dave Donhoff
Strategic Equity & Mortgage Planner

cmarlin20: "Seems silly to think an adult can't read and understand the basic loan terms."

Not so silly when apparently the supposed finance savvy banking/investment/Wall St. crowd did not understand the consequences of these mortgages either...and these are supposed professionals...hedge fund managers, major commercial banks, investment banks, etc...(yeah, right)

How else does anyone suppose the average Joe was able to actually borrow on such bogus terms to begin with?????

But of course, the architects of the scheme, who of course new better not only made their killing...but were bailed out as well...while their victims are left holding the bag...and being criticized for not knowing better.

Somehow, the homebuyer is getting held to a higher standard than the predatory finance world, that perpetuated the scam.

This is a sad, sad, world indeed.

Dave,

I thought I had made it clear that a fiduciary duty owed by an employees of an institution, however denominated, that actually offers mortgage loans, should be different than that owed by an independent mortgage broker. If I haven't, then I will do so now.

The employee loan officers should be expected to disclose the range of mortgage products that his/her own employees has available and for which the borrower qualifies. In other words, if the employee steers the borrower into a loan which is less favorable to the borrower but more lucrative for the employee's employer, then s/he is breaching the fiduciary duty owed to the customer.

In contrast, the IMB would have a fiduciary duty which is broader than, but not as deep as, that of the lending institution employee. It would encompass all of the products for which the borrower qualifies AND which the IMB is aware of. Unlike the employee, the IMB's duty of disclosure would not be limited to the programs of just one lender. OTOH, the IMB would not have to disclose ALL the available programs of any particular lender, and certainly not all the available programs from every lender, which would be impossible.

Got it now?

>>Not so silly when apparently the supposed finance savvy banking/investment/Wall St. crowd did not understand the consequences of these mortgages either...and these are supposed professionals...hedge fund managers, major commercial banks, investment banks, etcYou are comparing apples and oranges. The mortgage loans were chopped up into CDOs (collateralized debt obligations) and moved from the mortgage loan market into the equity markets as a result. This is why there is so much heat on the ratings agencies, who stamped them as less risky than they turned out to be. I've said this before and will say it again - the upheaval in the equity markets is because of the UNCERTAINTY who is bearing the risk on the CDOs. The one thing Wall St. hates is uncertainty! But in the end, the debt IS collateralized, it's merely a question of what the debt is now worth. Even assuming whole swaths of development tract homes are only worth 50% of what they were two years ago, the land they sit on still has value.

Think of the homes that have just been lost in the SoCal fires - is the land now worthless? Of course it isn't!

What the financial institutions are currently engaging in is a wave of write-downs so they can hopefully take advantage of a few "cookies" in future earnings quarters.

Don't know what cookies are to an FI?

From the WSJournal, 10/4/07:
"At the same time, some investors are wondering whether banks are being so conservative with their accounting that they will quietly book profits down the road as the securities they still hold rebound in value. Fans of accounting scandals know this as filling the cookie jar. Later, the cookie jar is emptied, giving earnings a boost when needed most.

When valuing securities that have all but stopped trading, clarity is relative. Some investors say they fully expect banks and brokers to take the maximum possible losses while investors are in a mood to accept them, a practice known as the "big bath" or "kitchen sink" approach. Later, the logic goes, they can mark the value of securities back up and recognize profits.

"If you're a smart CEO, you're going to write off everything and then some, maybe even to below-market prices, because you're going to be hidden in the woodshed with everybody else," says Daniel Genter, chief executive and chief investment officer of RNC Genter Capital Management, a Los Angeles-based investment firm that manages about $3 billion in bonds and stocks, mostly for high-net-worth individuals. "They'll make it look a lot worse than it is, but that's the smart move, because you've got little to lose and you might get some of it back in a quarter or two."

Analysts also expect banks to err on the side of taking as big a hit as possible. Only an "unwise" banker would do anything "other than take as much pain as possible," Chris Wheeler, European banks and specialty finance analyst with Bear Stearns, told investors yesterday during a conference call."
(excerpted from "Banks' Candor Makes Street Suspicious -
Is Spate of Write-Downs A Sign of Transparency Or 'Big Bath' Strategy?" by David Reilly and Edward Taylor, October 4, 2007; WSJournal)

FF,

You can try to re-position & re-design all you want... but the unaddressed problem remains;

The public will not willingly pay what the market would demand for fiduciary services... not as long as they can retain the freedom not to.

The public CURRENTLY has the freedom to EITHER seek out trustworthy professionals who operate from a fiduciary prospective... *OR* take the cheapest advertised rate quotes, et. al. from Bankrate.com and similar.

You can have it cheap (and get what you pay for,)
OR you can have it "fiduciary quality" and pay for what you get.

On what basis should we eliminate the public's freedom to choose either way?

Cheers,
Dave Donhoff
Strategic Equity & Mortgage Planner
(A pro that prefers the fiduciary position when the clients chose that.)

The only fiduciary responsibility I expect from MY bank is for them not to lose track of my money. Add, multiply and subtract correctly. I use free checking and internet savings so I doubt my banks make much from me.

Homeownership (or healthcare for that matter ) is not a "right". If you are ready for the responsibility then you better darn well know the rules of the game. Whining about being mislead after the fact does not excuse your ingnorance...

jkom51, technically, I may be comparing apples to oranges...but I spoke facetiously...in that the Wall St/finance/hedge fund crowd were VERY well aware that:

1) A false market had been created by all of the "creative" loan shark mortgage products

2) That those issuing the mortgages had PLENTY of incentive to steer borrowers into risky Soprano loans...even if they would have easily qualified for conventional.

3) That plausible deniability was created by computer modeling.

4) That the utter lack of regulation and oversight of the hedge fund sector had to blow up in some collectives faces sooner rather than later...

However...they took as much $$$$$$$$$ as they could...and more...and then convinced much of the naive public into believing that those at fault were really the greedy, stupid borrowers...aka their victims.

End resultthose who made a bundle get bailed out to the tune of billionsand the borrowers lose their homesand often, life savings....then, the borrowers get blamed for "not knowing better".

Now THERE is the real example of apples and oranges....one HUGE pyramid scheme...but entirely different end results...depending upon which side of the fence one was on during the ride.

DVW,

If, as you claim, imposing a fiduciary duty on mortgage brokers would create such a heavy financial burden on their clients (?), then how do other agents, like real estate agents, manage to stay in business?

The public always has the choice to do their own mortgage shopping, you know, just as they have the right to buy or sell a house without an agent.

What's the big deal, here? What's so special about mortgage brokers that imposing a fiduciary duty on them would somehow subvert the home-buying system? As you probably know, MBs do have a fiduciary duty to their clients in the state of California.

California hasn't fallen off the map, as far as I can tell.

Frankly, I think you're blowing smoke on this one. Either that, or you don't understand what a fiduciary duty is. You react as if it's some kind of guarantee of performance. It isn't that at all.

FF,

1st of, using California as an example is a pointless strawman;
A) The fiduciary treatment has been completely ignored, and NOT been prosecuted with any significant note,
B) It *ONLY* applies to loan officers who are licensed through the Department Of Real Estate as Real Estate Salespeople (the identical license as for real estate agents in California.) There are no less than 5 alternative licensing routes, none of which are held to fiduciary standards (as though California had ever shown any intention of uplholding the fiduciary standards where they DO apply.)

Now that we've swept that away; The truth of the matter is that if/when fiduciary standards are upheld, then selling gimmicks to maximize profits by dangling shiny puffery and using fear-based pressure tactics against a client's true best interests ("hurry and get a 30 yr FRM today, before rates rise") will be prohibited, or prosecuted.

When this becomes the case, a huge percentage of the industries "agents" will evaporate, leaving (hopefully) only those of sufficient quality and financial knowedge to be willing to take the risks of advising clients for a fee... instead of charging commissions "on the come."

It will make no financial business sense to advise clients to their best interests for free (just as for the standard attorney business model,) so consumers will lose the opportunity to access their mortgages in the "rate shopping" product-comparison manner they are now accustomed to.

You can't have the mortgages available from non-fiduciary sources to appease the rate-shoppers... or else you simply revert to what we have as a system already right now.

In short;
You can give people the freedom to have it either way, or you can eliminate their freedom to chose.

Your stumble on the California issue is the smoke that is clouding your ability to understand the issues. California isn't giving you an example to draw from.

Cheers,
Dave Donhoff
Strategic Equity & Mortgage Planner

"Banks have to have staff just to figure these idiot's checkbooks out."

Two kinds of people:
1. Your basic math person, who thinks people with checkbook problems are "idiot's."
2. Your basic language person, who reads the above-quoted sentence and gets a little tingly pain at both the error and its irony.

After working for a megabank for 26 years, I am amazed that anyone thinks that the banks do not have fiduciary responsibility to their clients!! Whenever you deal with other people's money you have fiduciary responsibility. I heard this many times over my years in banking. Now it appears that fiduciary responsibility was not taken and that great harm has come to many people because of avarice and greed. Lending lined the lender's pockets at the expense of appropriate guidelines and safeguards for clients. There is no fiduciary responsibility? Run for the hills folks....grab your money and run! Bury it in your backyard, stuff it in your mattress! Don't let banks get their hands on it. You may never see it again because they have no fiduciary responsibility!