[quote=flu][quote=bearishgurl][quote=FlyerInHi]Flu, I think you’re saying that “no cost” loans are better because they allow you to refinance again and again, guilt free (loss avoidance. You’re not “throwing away” out of pocket fees. That’s the marketing angle.
But past is past. Make decisions based on what you know today.[/quote]
In response to the italicized portion, maybe so. But a person who is a “serial refinancer” is still starting over again at 30 years every single time they refinance … that is, unless they choose a 15-year loan (with much higher payments). However, the vast majority of refinancers do so for the express purpose of lowering their monthly payments (thereby increasing monthly cash flow).[/quote]
God, I am not saying no cost loans are always better. I am saying it depends on your situation which depends heavily on whether you want/can pay more up front or want to pay over the long term, and use more of your upfront cash for something else.
Sheesh.[/quote]I agree that if they truly come at “no cost” to the consumer, than they are “better” for most people who won’t hold the property for the long term (meaning 12+ years).
How much the broker does or doesn’t make for procuring, preparing, processing and submitting a borrower’s mortgage loan app and supporting docs and placing their rate lock is immaterial because there is nothing the consumer can change about this system. As of April 1, 2011, an independent mortgage broker’s lender-paid compensation has been based upon loan amount only, NOT terms … as it was in the past. This provision was put in place to keep this group of brokers from being tempted to put unsophisticated borrowers in mortgage programs they have no business being in for the sole purpose of earning a higher YSP.
The new rule is known as the Loan Originator Compensation amendment to Regulation Z, part of a strengthened Truth in Lending Act passed by Congress in 2008. Designed to prevent consumers from being steered into high-cost, risky loans, it covers how a loan originator — or any person or company that arranges, obtains and/or negotiates a mortgage for a client — is paid.
Under the new rule, a lender can no longer pay a loan originator a lucrative rebate known as a yield-spread premium, which is tied to the rate or terms of the mortgage. Banks and other lenders can continue to pay commissions to brokers, but these payments must now be based solely on the loan amount.
In the past, the higher the interest rate and points, the more money a broker stood to earn….
(emphasis mine)
A borrower either wants to work with a mortgage broker who will shop the best loan for their circumstances … or they don’t. A borrower can’t have it both ways, i.e. all of the above highly specialized services for “free” (to make them look good on paper to an underwriter), plus expect a kickback on closing costs (or zero closing costs) while also expecting their broker who did all the work for them to make little or nothing.
There are very few institutional lenders anymore. And even their mortgage loan officers get paid by the institutions relative to their production. A mortgage borrower also has far fewer choices today on the types of mortgages actually available on the open market and the terms under which they can get them. If a borrower doesn’t like how the new “system” works, they are always free to pay cash for their RE purchase :=]
