'Mortgages Part of Financial Plans'

Mortgage Wire

Brad Finkelstein

January 15, 2004

A financial planner should be involved in the client's mortgage because they already have all of their financial information and are already evaluating the liability side of the client's balance sheet, the president of Thornburg Mortgage Home Loans Inc. said in a Web-based seminar aimed at financial planners.

Financial planners, explained Ron Chicaferro, "are at the center of the client relationship. One item you really need to talk to your clients about is their mortgage."

Mr. Chicaferro used the seminar to push what he said are the benefits of putting clients in adjustable-rate mortgage loans.

Financial planners need to look at ARM loans as a way to save their client's money, noting that these loans are at rates lower than the 30- year fixed.

"Sophisticated borrowers" that use financial planners, he said, take an ARM 50% to 60% of the time.

Mr. Chicaferro then spent a few minutes on the "innovative products" that are available through a portfolio ARM lender such as Thornburg.

There is an interest-only loan that lets the borrower pay down the principal at any time, not just in a balloon payment at the end.

This product, he said, is excellent for the person who has an annual salary, but gets a huge bonus at the end of the year. But, he added, the loan should only be "recommended to clients who need the maximum tax write-off."

Another product available through Thornburg that would benefit financial planners is the pledged asset program. The assets are pledged in lieu of a downpayment. In this way the investment accounts do not have to be liquidated to raise cash.

However, he noted in response to a question, if the value of the pledged asset account decreases, the borrower is subject to a margin call.

It is not an option for all of a financial planner's clients, Mr. Chicaferro said, but it is worth talking about with them.

Part of the webinar discussed the differences between financial planners using Thornburg (or another portfolio lender) vs. teaming with a mortgage broker.

Mr. Chicaferro said he didn't have anything against mortgage brokers and that they provide good service, but financial planners need to be aware of the costs involved with using a broker.

As a portfolio lender, Thornburg does not charge an origination fee. Brokers charge a 1% or higher fee.

For financial planners seeking a mortgage for themselves or for a client Thornburg does not charge an underwriting or processing fee. Because it does not sell the loan, there is no yield-spread premium.

Another advantage of not selling the loan, he said, is that there is no buyer to cross-sell other products that they offer to the financial planner's clients.

But the biggest advantage of using Thornburg, he said, is its loan modification option. Thornburg allows its borrowers at any time, and as many times as they want, to modify their mortgage. This includes the ability to switch it into another product. There is a $1,000 fee charged each time a modification is done.

The modification option, Mr. Chicaferro said in response to a question, offers protection in a rising interest rate environment.

"There is no reason you should put a client into a 30-year, fixed- rate mortgage," he said.

The only time to use a mortgage broker, he said, is when the borrower is of lower credit quality. That is when the client is best served by the abilities of a broker.

Under the Real Estate Settlement and Procedures Act, financial planners cannot get a referral fee. However they can charge clients an advisory fee, just as they do for managing their portfolio.

"That is how most financial planners we work with get compensated," Mr. Chicaferro said.

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