[quote=no_such_reality][quote=flu]Yeah, I don’t quite get what the issue is. If you want to refinance, you can either get a loan with no out of pocket payments with rate X or if you want to pay closing costs and points, you can get rate Y where Y is less than X.
There’s nothing deceptive about this.[/quote]
The concept is simple, the execution historically has been fraught with deception and poor ethics.
YSP still clouds the issue for the end consumer and obscures how much is really being paid for services particularly when tagged with the above, IMO.[/quote]NSR, escrows aren’t “rocket science.” In the absence of being in the middle of refi for purchasing RE, one is certainly free to call around and/or visit websites of local escrow companies, title companies who do business in your county and whichever lenders who have products you are interested in looking into. They and/or their site will TELL you how much their ALTA and CLTA rates are per $10K or $100K of your loan or purchase price, what is customarily paid in CA by the buyer and the seller or split between the two, typical escrow fees for your loan amount or purchase price, loan or buy-down fees, doc drawing fees, typical appraisal fees (whether in-house or contracted), even tax service fees and typical notary fees for your transaction! Upon shopping for mortgages, you should easily be able to see which lenders have a lot of “garbage charges” and who doesn’t and the reasons why in each case.
In CA, all your ancillary fees are the SAME to you as the seller or buyer/borrower whether or not you even take out a purchase money mortgage or WHO contracts for them (seller’s choice, buyer’s choice, escrow company’s choice (which may be a subsidiary of a title company), or the lender who is paying for all of it (providing it to their borrower-client “free”).
If your lender provides all your ancillary services for “free,” they are certainly going to exercise their right to contract with services of their choice and yes, they may have a financial stake in some of the service providers they opt to use. But ALL of these tasks still must get done, whoever does them, and, in this case, the borrower isn’t paying for it. For example, there isn’t that much difference in title insurance fees from one title company to another. One or two in each county have their own plants but every one of them has to get their info from the same horse’s mouth …. that is, your county recorder and assessor’s office.
The inner workings of YSP between lenders and boots-on-the-ground mortgage brokers, originators and bankers are not well understood or generally known to the public and it doesn’t matter (except when they were an exorbitant 5-12% during the exotic mortgage, fog-a-mirror, get-a loan era). During those years, NINA mortgages were commonly (fraudulently) made to people with a known (to the mortgage broker) falsified mortgage application and supporting docs (often prepared for the lender’s underwriter by the broker’s own processor). This was all engineered to line the pockets of shady, greedy mortgage brokers when their clients agreed to the terms of exploding mortgages due to having bad credit or no credit and often needing “rescuing” from imminent foreclosure. Many of these mortgage brokers have since had their licenses suspended or revoked … for good reason.
YSP is the same principle as buying a new vehicle from a dealer who is selling it to you for well under True Car and Edmund’s price points for your area because the vehicle mfr will compensate them after the sale thru the back end (thru a bonus or “kickback”). As a new vehicle buyer, you don’t CARE about this nor do you have any control over it! You only care about the terms of your OWN deal. These “bonuses” aren’t well known or understood by the new vehicle-buying public but it doesn’t matter, because, just as with mortgage brokers, mortgage bankers and lenders, that’s the way the “system” is set up.
There is no free lunch. Someone is paying for your necessary services which you legally must have third parties perform in order to complete your RE transaction. It’s actually a “good thing” that YSP’s exist, because if they didn’t, every single borrower would be paying for (or financing, on top of their P&I) their own closing costs. That’s the way it used to be back in the dark ages (’80’s and prior) before the use of YSP’s began to be widespread. If you didn’t have the cash to close, you weren’t able to buy (or refi). Prospective buyers were not yet ready to buy until they saved enough for their downpayment AND closing costs.
