Upfront mortgage lender

An Upfront Mortgage Lender (UML) is an Internet lender that meets the requirements set forth by the Mortgage Industry watchdog site Mortgage Professor. The list of these lenders was compiled to address the lack of a registry or industry standards for those lenders that could be considered trustworthy, and those that could be considered predatory. The list of Certified Upfront Mortgage Lenders is compiled and maintained by Jack M. Guttentag, a Professor of Finance Emeritus at the Wharton School of the University of Pennsylvania, and founder of GHR Systems, Inc., a mortgage technology company.
Requirements
The criteria for becoming a UML are as follows:
1. The lender must provide quick online access to the loan products and niches that it provides.

A perspective borrower should be able to visit the lenders website and find out if the loan type they are looking for is provided by the lender. If not, the borrower can search elsewhere. This prevents a borrower from wasting time shopping a lender that will not be able to qualify them for the loan type they require.
2. The Lender must discloses all lender fees, and guarantees them to closing.
This requirement ensures that the stated costs for a loan as well as the interest rate and fees will not increase after the borrower has committed to the loan. This requirement addresses problem of lenders increasing fees shown on the Good Faith Estimate at the time of closing.
3. The lender honors the interest rate and fees included in its lock statement, as well as fixed-dollar fees contained in a GFE issued prior to a lock.
This requirement ensures that the quoted interest rate and fees will be honored at the time of closing.
4. The lender Provides a clear explanation of its rate lock requirements, and discloses them to the borrower. These disclosures must be displayed prominently.
This requirement ensures that the borrower will know when and how to lock their rate and payments. This addresses the issue of interest rates rising without the borrowers knowledge due to rate lock requirements that were not disclosed to the borrower. It also lets the borrower know when all other guarantees of interest rates, payments, and closing costs are set in place.
5. The lender discloses all third party fees as accurately as possible. The lender also provides information about which fees are guaranteed by the lender.
This requirement ensures that the borrower will have the most accurate estimate possible of fees that are not set forth by the lender. These can include, but are not limited to taxes set forth by the state and federal government as well as fees for home appraisals, and escrows of taxes and insurance.
6. The lender discloses all relevant information about its Adjustable Rate Mortgage (ARM) programs. This includes information about the criteria used to determine the borrowes nw interest rate when it adjusts.
This requirement addresses the issue of beginning low interest rates that rise when the fixed period of the loan has expired. This ensures that borrowers are aware of the potential for higher interest rates when the adjustable period begins, as well as the conditions used to assess the borrowers new interest rate when it adjusts.
7. The lender informs borrowers if its loan officers are compensated for charging the borrower more than is required by the lending institution.
This requirement ensures that borrowers are aware of the potential for higher interest rates and payments than those that they qualify for. Many lenders pay their loan officers more when a borrower closes on an interest rate higher than what the lender is offering ( PAR rate). This ensures that the borrower can find the lowest rate that they qualify for by allowing them to avoid lenders whose loan officers have incentive to offer higher interest rates.
Good Faith Estimate vs. Upfront Guarantee
All lenders are required by law to provide disclosure documents to borrowers including documents regarding the estimated costs of the loan. The document that provides this disclosure is known as the Good Faith Estimate or GFE. This document provides the lenders best guess as to the final costs, interest rate, and monthly payments charged to the borrower. This document provides no guarantee that these charges will not change.
An Upfront Guarantee is a guaranteed assessment of charges and is provided on a voluntary basis by the lender. There is no legal requirement to guarantee that these figures will remain the same, though this is a primary requirement to be certified as an Upfront Mortgage Lender.
Response to Industry Conditions
The UML certification was created to address industry conditions that were contributing to predatory lending, as well as intentionally misleading practices. Specifically the implosion of the Sub-Prime mortgage market. The certification follows no specific industry standard and is meant as a guideline to borrowers. This certification in no way guarantees the lowest interest rates or fees available and does not take into account any additional fees the lender may charge for the loan, only that these fees be disclosed.
The certification is intended as a guideline for borrowers, but does not guarantee the lenders honesty, integrity, or business practices.

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