Truth about Mortgages from HLS

[HLS]

The lending industry is built on what is called “rebates” or “YSP” (Yield Spread Premium)

A few years ago, the banking industry realized that loan brokers were able to aggressively compete with them and the % of loans orignated was declining through banks. Good for consumer. NOT good for big business.

In an effort to portray mortgage brokers in a bad light, a regulation was created which states that direct lenders do not have to disclose 1 important piece of information to you, but brokers do. (explained below)
It created an unlevel playing field and created the illusion that you would always get the best loan by going to a direct lender, and to this day still has a large % of people fooled.

Because the industry is loosely regulated, a large number of unethical,dishonest,immoral,rogues stepped in and preyed on vast numbers of people by misleading them and taking advantage by overcharging borrower’s to make large commissions.(Rebates or YSP) The bad eggs overshadowed the honest loan officers. Bad for consumer. Good for banks.

It totally distorted what should have been a blessing for the consumer.
This confirmed what the banking industry wanted to show.

Here is how it works:

If you deal with a “direct lender” (one who loans their own money from deposits like banks OR large lenders) they do not AND will not disclose to you that you are paying a higher rate than you need to.
They may say things like we don’t have any closing costs or origination fees, but in fact it’s just built into their pricing. They have to pay employees and commissions too.
When you deal with a bank, they only offer you their limited products and rates do vary.

When you deal with a broker, there are true wholesale PAR rates. If a broker gave you the PAR rate, they would not receive a single penny from the lender, that is why brokers charge a fee. The problem is that many charge ridiculous, outrageous,predatory fees, esp to 1st time buyers and those with credit issues.

IF the broker receives a rebate or YSP, it MUST be disclosed to the borrower, but usually ONLY shows up on 1 line of the closing statement that the borrower ONLY sees at doc signing, and is so overwhelmed with pages at that time, they wouldn’t understand it if it jumped out and bit them.

The ONLY way that rebate is received is because the borrower was OVERCHARGED in rate, so the lender will receive a higher return for the life of that loan.
The broker is rewarded with a commission from the lender for screwing the borrower. Many charge an up front fee AND Overcharge you in rate. They only tell you about the up front fee.

Anybody that claims “NO COST LOANS” are just overcharging you to the point that the commission on the back end covers all the fees and their profit.
It will cost the borrower in higher rates and higher monthly payment for the life of the loan, so the “NO COST LOAN” ends up costing a small fortune in the long run, In our area, possibly tens of thousands of dollars over the life of the loan, AND there still may be fees!

If you plan on keeping a loan for LESS than 2 years, a no cost loan might make sense.
If you plan on keeping a loan longer than 5 years, it is in your best interest to pay a FAIR fee to get a loan, AND buy the rate down to secure a lower rate and payment for the life of the loan, if it makes sense.

The ONLY fee that a broker is in direct control of is their fees. They CANNOT legally profit in any way from the fees for lender underwriting, title, escrow & appraisal UNLESS they have ownership in them.

There is absolutely NO generalization that will ensure that you received the best loan possible on any given day OR that going to a bank/direct lender will get you a lower rate.

The best thing that you can do is find someone that you trust, agree on their fee, and let them work for you.
There are honest, ethical people in the brokerage biz, and you may benefit by using them.

It’s confusing, even to consumers who have originated multiple mortgages.

Please post any questions that you have or I can contact you privately at your request.

[Alex_angel]

And now these same lenders are crying foul at all the bad loans given out. Lol.

[Alex_angel]

And now these same lenders are crying foul at all the bad loans given out. Lol.

[CMcG]

Thanks for your explanation of YSP. I was over on the implode-o-meter forum earlier today and there is a heated discussion going on about this. Since most of the posters seem to be brokers or at least a whole lot more mortgage savvy than I am (although I am trying to learn), I was completely lost and finally clicked out!

[CMcG]

Thanks for your explanation of YSP. I was over on the implode-o-meter forum earlier today and there is a heated discussion going on about this. Since most of the posters seem to be brokers or at least a whole lot more mortgage savvy than I am (although I am trying to learn), I was completely lost and finally clicked out!

[HLS]

Sorry.. It stands for YIELD SPREAD PREMIUM…

Fancy words for You got Screwed on your Interest Rate.

It will ONLY show up on one line of your final closing statement (HUD-1).. It is not in your column of numbers, it is usually off the left with the letters POC (Paid Outside Closing)

The 6 letters that you don’t want to see on your final statement (unless you agreed to it) YSP & POC.
You usually only see this statement when you are signing docs.
Even an estimated HUD that you might see prior to signing may not show this.

A loan from a bank or direct lender WILL NOT show this amount. Overcharging you is all internal to them.
Bank employees probably don’t even know about it and just insist that they have no fees.. It’s what they are told.

IF you ask, many slimeballs lie and say that it didn’t cost you anything, which is an outright lie.
You are paying higher monthly payments for the life of the loan so slimeball can get the YSP rebate.

Getting a PAR rate pays no YSP-rebate. Not a penny.

[HLS]

Sorry.. It stands for YIELD SPREAD PREMIUM…

Fancy words for You got Screwed on your Interest Rate.

It will ONLY show up on one line of your final closing statement (HUD-1).. It is not in your column of numbers, it is usually off the left with the letters POC (Paid Outside Closing)

The 6 letters that you don’t want to see on your final statement (unless you agreed to it) YSP & POC.
You usually only see this statement when you are signing docs.
Even an estimated HUD that you might see prior to signing may not show this.

A loan from a bank or direct lender WILL NOT show this amount. Overcharging you is all internal to them.
Bank employees probably don’t even know about it and just insist that they have no fees.. It’s what they are told.

IF you ask, many slimeballs lie and say that it didn’t cost you anything, which is an outright lie.
You are paying higher monthly payments for the life of the loan so slimeball can get the YSP rebate.

Getting a PAR rate pays no YSP-rebate. Not a penny.

[JPJones]

This was very insightful. Thanks for the info.

[JPJones]

This was very insightful. Thanks for the info.

[no_such_reality]

Here’s a link for finding the YSP on your settlement docs: Mortgage U

[no_such_reality]

Here’s a link for finding the YSP on your settlement docs: Mortgage U

[POZ]

HLS,

Thanks for the info, It seems to me that every time you THINK you have your mind around this someone throws another wrench into the mix. what is the best one stop source or questionaire that someone can easlily use? I emphasize EASILY because as you mention there are lots of unscrupulous predators out there WHO can you trust? how do you find a reputable broker/lender if you have disparate bits of information to work off of? I think it would be worth while effort to put these things in writing with specific examples of good and bad brokers, again a clear and concise form for us sheep to use.

NSR thanks for the link it looks intresting — just few more hours worth of reading thanks!!!

[POZ]

HLS,

Thanks for the info, It seems to me that every time you THINK you have your mind around this someone throws another wrench into the mix. what is the best one stop source or questionaire that someone can easlily use? I emphasize EASILY because as you mention there are lots of unscrupulous predators out there WHO can you trust? how do you find a reputable broker/lender if you have disparate bits of information to work off of? I think it would be worth while effort to put these things in writing with specific examples of good and bad brokers, again a clear and concise form for us sheep to use.

NSR thanks for the link it looks intresting — just few more hours worth of reading thanks!!!

[HLS]

There are always a few things that you can ask to see if they know what they are talking about.
There is no one list, because it depends on the situation.

The list of predatory tricks and scams is endless.

You need to let someone prove to you that you can trust them. Nobody can “guarantee” that you are getting the cheapest/best/lowest rate on the planet, as in any product, it just isn’t possible, but some do.

Just insist on getting all of your questions answered, and knowing your options and having them explained to you so you can decide what is right for you. If you cannot understand what they are explaining, walk away.

Know what you are paying, and be willing to learn.
If they are only trying to “sell” you a loan without discussing your needs/wants/goals, RUN.

Virtually nobody wants to educate you at their expense.

I am in the loan origination business. I do what I say.
My honesty & integrity doesn’t change.

Sometimes things go wrong with a loan that come out of left field, totally out of my control. If they do, I don’t hide it.

People that want to spend months trying to read everything still need to find someone honest to deal with. Even if I read about how to put an engine together, I wouldn’t be able to do it.

When you find the right person, it doesn’t matter what you know at the beginning, you will have learned what you need to know by the end.

If you just get a loan and learn nothing from it, I don’t think that you got what you paid for.

If you’d like to post your email address, I’d be happy to contact you privately.

The biggest joke to me is that many people go to “friends & family” who are often the biggest predators. They don’t need to earn your trust and take advantage of that.

[HLS]

There are always a few things that you can ask to see if they know what they are talking about.
There is no one list, because it depends on the situation.

The list of predatory tricks and scams is endless.

You need to let someone prove to you that you can trust them. Nobody can “guarantee” that you are getting the cheapest/best/lowest rate on the planet, as in any product, it just isn’t possible, but some do.

Just insist on getting all of your questions answered, and knowing your options and having them explained to you so you can decide what is right for you. If you cannot understand what they are explaining, walk away.

Know what you are paying, and be willing to learn.
If they are only trying to “sell” you a loan without discussing your needs/wants/goals, RUN.

Virtually nobody wants to educate you at their expense.

I am in the loan origination business. I do what I say.
My honesty & integrity doesn’t change.

Sometimes things go wrong with a loan that come out of left field, totally out of my control. If they do, I don’t hide it.

People that want to spend months trying to read everything still need to find someone honest to deal with. Even if I read about how to put an engine together, I wouldn’t be able to do it.

When you find the right person, it doesn’t matter what you know at the beginning, you will have learned what you need to know by the end.

If you just get a loan and learn nothing from it, I don’t think that you got what you paid for.

If you’d like to post your email address, I’d be happy to contact you privately.

The biggest joke to me is that many people go to “friends & family” who are often the biggest predators. They don’t need to earn your trust and take advantage of that.

[Author]

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