RESPA violations - RESPA is the Real Estate Settlement and Procedures Act. It was first passed in 1974 to help consumers become better shoppers for mortgage settlement service providers. It also helps eliminate kickbacks and referral fees between settlement service providers that unnecessarily drive up settlement costs. With the passing of RESPA, there are now many ways that mortgage settlement providers can break the law. Following is a list of some of these ways.

No lender is allowed to pay any form of 'referral fee' in order to acquire your business. A referral fee can be any thing of value, even something as small as a stick of gum. If you or anyone you know has received something of value for referring someone to a specific lender, that lender is violating RESPA, and could face legal action in the future.

RESPA, or the Real Estate Settlement and Procedures Act, states that a mortgage company needs to provide a GFE, or a Good Faith Estimate, within 3 days of application to a borrower applying for a home mortgage loan. The GFE is a list of estimated fees that will be charged with your home mortgage loan transaction. If your lender, mortgage company, mortgage broker or Loan Officer do not provide the GFE to you within 3 days of applying for a home loan this is a direct violation of RESPA.

Bank loan officers versus brokers - When choosing a mortgage professional to work with, you need to decide if you are going to work with a loan officer from a bank or a broker. There are some major differences between the two. Here is some of what sets them apart.

Banks use retail rates, while brokers have access to whole sale rates. Brokers are also working with multiple lenders so they have several whole sale rates to choose from. This means they can find the lowest rate for your situation.

Bank loan officers typically offer programs for "A Credit" borrowers or those with the best credit. Mortgage Brokers have access to hundreds of different programs to fit every credit need.

Local retail banks sell only their own loan products. If a bank does not offer a loan program suitable for a borrower in a particular situation, rather than going outside of the bank to find the perfect product, a bank loan officer would try to sell to the client the next best thing. A mortgage broker has much more loan programs to offer. In the same situation, a broker can usually go to other banks and structure a home financing plan short of tailored made for the borrower.

Loan officers who work for brokers are often paid as 'independent contractors'. As such, they usually are only paid commission and have the freedom to operate how they want (within reason). One advantage of this is that they may be willing to work in the evenings and on weekends if that is the only time that you are available to meet with them. Sometimes they are even willing to drive to your home to save you time and make the process that much easier for you. This isn't always the case, however, so don't expect it.

When you work with a broker, you will find out how much the loan officer is being paid in Yield Spread Premium (YSP). This is something that the lender pays the broker, and the amount that is paid is dependent on your interest rate. A loan officer can raise your interest rate in order to be paid more in YSP from the lender. This allows them to charge you less in fees on the Good Faith Estimate (GFE), and in many cases can save you money.

Bank loan officers are also paid Yield Spread Premium, but they are not required to disclose how much they are making.

Can I Refinance with Cash Out? - While many believe that the only reason to refinance a home would be to lower the interest rate, one of the most popular refinance motivations is to obtain cash out of the homes equity. The truth is that there is almost no way to borrow money less expensively than using the first mortgage on your primary residence. In most cases, the amount of cash you can receive is limited on by the amount of equity that you have.

A common use for taking cash out of your equity is to pay off other high interest debt. By consolidating all of your debt into your home mortgage, you can save money on the total amount that you spend each month on debt payments. Where people often run into trouble is when they go back out and rack up more debt on their credit cards, buy a new car, or otherwise create more debt. Debt consolidation should not be used as a way to take on more debt, but rather a way to manage the debt that you already have.