[HLS]

I’m in the lending biz, I understand loans.

I’m not saying that KAY needs to refi, but what “seems like a keeper loan” to you could be 10% within 24 months of first change.

You mention a 30YR fixed rate (which they may or may not even qualify for depending on 10-15 other pieces of information), which assumes that they intend to keep the loan long term, so IF TRUE, your conclusion is that the 10% loan within 24 months is a keeper, rather than a locked long term loan in the 6’s.

Great advice.

[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.

[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.

[HLS]

Kaycee,,

I’m curious why you say “Obviously, I can’t refi now since it isn’t my primary anymore” ?? (Of course you can)

I’m like MONK when it comes to this stuff. Your figures are pretty good.

If you started with $322K and a 5 YR ARM, Your P&I payment @ 4.125% should be $1560.
After 5 years your balance will be down to $300,094 and IF you have a 2% increase, at 6.125% your new payment will be $1956, about $400 a month higher (+25%) but that may only be for 6 months (or 12) depending on your loan, and then it increases again each 6 or 12 mos.

Since you bought in ’03, you should have equity, and rental income that covers the nut, or comes close.

There are people that can barely afford their payment now, and a 25% increase would be the nail in their coffin.

Glad that it worked out for you.

[HLS]

Kaycee,,

I’m curious why you say “Obviously, I can’t refi now since it isn’t my primary anymore” ?? (Of course you can)

I’m like MONK when it comes to this stuff. Your figures are pretty good.

If you started with $322K and a 5 YR ARM, Your P&I payment @ 4.125% should be $1560.
After 5 years your balance will be down to $300,094 and IF you have a 2% increase, at 6.125% your new payment will be $1956, about $400 a month higher (+25%) but that may only be for 6 months (or 12) depending on your loan, and then it increases again each 6 or 12 mos.

Since you bought in ’03, you should have equity, and rental income that covers the nut, or comes close.

There are people that can barely afford their payment now, and a 25% increase would be the nail in their coffin.

Glad that it worked out for you.

[HLS]

Kaycee,,,
Not sure exactly what loan you have, but I would guess that your payment is going up more like $500 a month, if your loan is $300k and your margin is rising 2 pts.
If $300 is a 20% increase, $500 is over 30%.

The tradeoff is that you have saved $$ since inception.

If you plan on staying in the property after next May, you are gambling on the future. As long as you understand that, it’s OK.

Depending on a number of factors, If you plan on a refi,what is available to you today may not be available to you next year.

[HLS]

Kaycee,,,
Not sure exactly what loan you have, but I would guess that your payment is going up more like $500 a month, if your loan is $300k and your margin is rising 2 pts.
If $300 is a 20% increase, $500 is over 30%.

The tradeoff is that you have saved $$ since inception.

If you plan on staying in the property after next May, you are gambling on the future. As long as you understand that, it’s OK.

Depending on a number of factors, If you plan on a refi,what is available to you today may not be available to you next year.

[HLS]

This is what’s on the table today. Who knows what tomorrow will bring. Loan mods at the moment are thus:

“You cannot pay $2,000 a month and are $4,000 behind, why don’t you pay us $3,000 a month for the next 4 months and get caught up”

That’s loan mod today. Can’t afford to pay $2K, so the answer is $3K,, makes sense right ??

In addition, they whack your credit score and you are pretty much screwed no matter what, and still owe late charges.

Modifications are not reducing what is owed. You think that they are reducing principal on mods ?? Not that I know of….

I’m sure that you know, the worst loans were sold off on Wall Street, who knows where the paper actually is.
The servicing companies just do their jobs.

There will be major defualts but It may not be players that are well known. This is years away from being over.

[HLS]

This is what’s on the table today. Who knows what tomorrow will bring. Loan mods at the moment are thus:

“You cannot pay $2,000 a month and are $4,000 behind, why don’t you pay us $3,000 a month for the next 4 months and get caught up”

That’s loan mod today. Can’t afford to pay $2K, so the answer is $3K,, makes sense right ??

In addition, they whack your credit score and you are pretty much screwed no matter what, and still owe late charges.

Modifications are not reducing what is owed. You think that they are reducing principal on mods ?? Not that I know of….

I’m sure that you know, the worst loans were sold off on Wall Street, who knows where the paper actually is.
The servicing companies just do their jobs.

There will be major defualts but It may not be players that are well known. This is years away from being over.

[HLS]

I’m not trying to fool anyone. Sometimes, the builder incentive issue isn’t something that I can compete with, and I tell people that up front.

To save face, builders don’t like to lower selling price. It affects neighbors, attitudes and comps, etc…. SO what they do is keep selling price the same and increase incentives. It might be prepaid assn fees, or contribute to closing costs, but what I explain to people that I cannot compete with is when builder offers $50,000 in upgrades, that is $50K at their RETAIL. You might be able to get the same work done for $15K (or less) BUT…

One problem is that even if you bought the base model, you cannot get a lower selling price because builder doesn’t want to SELL for less. It also doesn’t make sense to take a brand new base model, buy it, and then start ripping it apart to save money on upgrades. You may void some builder warranties.

Builders play other games like saying if you take our financing, you only need a $5K deposit, but if you want outside financing you need a larger deposit, or have to pay for upgrades UP FRONT. etc.

You are dealing with huge public companies that understand business. You can get a fair deal, but you aren’t going to take advantage of Home Builders, Car Dealers or Casinos regardless of what their employees tell you.

It’s definitely worth checking around, but the builder’s know how to play the game. What you may not know is that the builder may own the “preferred lender” and may even own the escrow company. Somewhere in small print they will disclose their affiliation.

Another HUGE issue with upgrades is the actual appraised home value, regardless of incentives. Lenders don’t always lend on upgrades reatil or prepaid assn fees.

$50,000 “retail” in upgrades might add $15k-$20k to home value. Even if a buyer agrees, the lender may not accept the
appraisal.

Many people think that builders HAVE to lower prices soon…
It’s not so simple. You are dealing with HUGE public companies that have some deep pockets after the last few years. It’s just a game of cat & mouse. Some builders are going to go bust after the boom, others will offset losses from other areas of the country…. They can manipulate accounting numbers for awhile. The true losers become the stock holders.. Management still gets their salaries (and pron bonuses!) Lots more can be said about this.

[HLS]

I’m not trying to fool anyone. Sometimes, the builder incentive issue isn’t something that I can compete with, and I tell people that up front.

To save face, builders don’t like to lower selling price. It affects neighbors, attitudes and comps, etc…. SO what they do is keep selling price the same and increase incentives. It might be prepaid assn fees, or contribute to closing costs, but what I explain to people that I cannot compete with is when builder offers $50,000 in upgrades, that is $50K at their RETAIL. You might be able to get the same work done for $15K (or less) BUT…

One problem is that even if you bought the base model, you cannot get a lower selling price because builder doesn’t want to SELL for less. It also doesn’t make sense to take a brand new base model, buy it, and then start ripping it apart to save money on upgrades. You may void some builder warranties.

Builders play other games like saying if you take our financing, you only need a $5K deposit, but if you want outside financing you need a larger deposit, or have to pay for upgrades UP FRONT. etc.

You are dealing with huge public companies that understand business. You can get a fair deal, but you aren’t going to take advantage of Home Builders, Car Dealers or Casinos regardless of what their employees tell you.

It’s definitely worth checking around, but the builder’s know how to play the game. What you may not know is that the builder may own the “preferred lender” and may even own the escrow company. Somewhere in small print they will disclose their affiliation.

Another HUGE issue with upgrades is the actual appraised home value, regardless of incentives. Lenders don’t always lend on upgrades reatil or prepaid assn fees.

$50,000 “retail” in upgrades might add $15k-$20k to home value. Even if a buyer agrees, the lender may not accept the
appraisal.

Many people think that builders HAVE to lower prices soon…
It’s not so simple. You are dealing with HUGE public companies that have some deep pockets after the last few years. It’s just a game of cat & mouse. Some builders are going to go bust after the boom, others will offset losses from other areas of the country…. They can manipulate accounting numbers for awhile. The true losers become the stock holders.. Management still gets their salaries (and pron bonuses!) Lots more can be said about this.

[HLS]

Going back to the good ol’ days of yore.

One problem today is that even people who put 10% down several years ago and got 90% financing, today need 100% financing.

People with low score, 100% financing that did an ARM are screwed.

I will post a separate thread about ARM’s adjusting.

For self employed, tax returns and bank statements to prove cash flow. It doesn’t necessarily prove income, lenders know this.

These are SUBPRIME guideline changes,, Prime lenders have diff guidelines.

IF you qualify, stated income is still possible at some rate. The thirst for high returns isn’t going away.

What most people do not understand is QUALIFYING for the program.

As discussed elsewhere, there are people whose lives will be financially ruined because they bought a house at the wrong time. No one is going to be able to save them.

[HLS]

Going back to the good ol’ days of yore.

One problem today is that even people who put 10% down several years ago and got 90% financing, today need 100% financing.

People with low score, 100% financing that did an ARM are screwed.

I will post a separate thread about ARM’s adjusting.

For self employed, tax returns and bank statements to prove cash flow. It doesn’t necessarily prove income, lenders know this.

These are SUBPRIME guideline changes,, Prime lenders have diff guidelines.

IF you qualify, stated income is still possible at some rate. The thirst for high returns isn’t going away.

What most people do not understand is QUALIFYING for the program.

As discussed elsewhere, there are people whose lives will be financially ruined because they bought a house at the wrong time. No one is going to be able to save them.

[HLS]

Alex…
Please understand that sites like bankrate are very misleading.
Without qualifying you for your EXACT situation, the rates and “average” rates that you are looking at don’t tell the whole story, and honestly mean nothing.

The industry has been built on misleading the borrower into believing that they qualify for a certain rate, then in many/most cases finding out that it it’s going to be higher OR that they don’t qualify at all. It disgusts me.

Most who “shop” by asking “what’s your rate” are just asking to be fooled. When asked, most in the industry just lie and offer a lower rate than what is truly available, to mislead and make the borrow think that they found the lowest rate. Even if they were to lock the rate that day, it doesn’t mean that they will qualify and get approved.
I could lock a rate even though I know you don’t qualify for it. (Not something that I do) to get you started in the process.

I know it’s what most people do, and it’s why many people have a horrible experience or go through torture to get a loan. Lots of liars in the biz.

I’d need answers to important questions before I could price the loan for you. It’s what YOU don’t know about sites like bankrate that are dangerous.
With the limited information above, you may not even qualify for 95% financing.

Everything to a lender is risk/reward. One thing that I can tell you for sure, is that you will be MUCH better off with 10% down and a PAR(wholesale) rate for a 80/10 rather than 5% down and buying the rate down. (15%-20% down even better)

Find someone that you can trust, agree on a fixed fee to them, and let them find you the best loan that you actually qualify for. That’s probably the best way to “shop” for a loan.

Anything other than that is what leads to the lies, deceptions, trickery, overcharging, etc that goes on, EVEN when you deal with family & friends. People asked to be fooled and get what they wish for.

Dealing with builders is a whole other game. They try to make a profit from every angle of the transaction, including upgrades and financing. There is no solid generalization, but they also mislead with their rates.
In general, incentives from builders are convenient, but expensive.

Assuming that going directly to a bank gets you the best loan is probably the biggest myth out there. It might be possible,(esp when compared to a slimeball) but if you’re dealing with someone honest, you may have many more options to get a better loan.

Banks DO NOT have to disclose when you are overcharged, brokers DO have to disclose it. It’s the power of the banking industry.

My general advice is don’t strap yourself and be a slave to a mortgage, esp in this market.

Knowing what you need to qualify for a great loan means that you can prepare & plan for it, instead of walking in and getting blindsided.

I’d be happy to speak with you privately about your situation.
Please look for my email. Thanks.

[HLS]

Alex…
Please understand that sites like bankrate are very misleading.
Without qualifying you for your EXACT situation, the rates and “average” rates that you are looking at don’t tell the whole story, and honestly mean nothing.

The industry has been built on misleading the borrower into believing that they qualify for a certain rate, then in many/most cases finding out that it it’s going to be higher OR that they don’t qualify at all. It disgusts me.

Most who “shop” by asking “what’s your rate” are just asking to be fooled. When asked, most in the industry just lie and offer a lower rate than what is truly available, to mislead and make the borrow think that they found the lowest rate. Even if they were to lock the rate that day, it doesn’t mean that they will qualify and get approved.
I could lock a rate even though I know you don’t qualify for it. (Not something that I do) to get you started in the process.

I know it’s what most people do, and it’s why many people have a horrible experience or go through torture to get a loan. Lots of liars in the biz.

I’d need answers to important questions before I could price the loan for you. It’s what YOU don’t know about sites like bankrate that are dangerous.
With the limited information above, you may not even qualify for 95% financing.

Everything to a lender is risk/reward. One thing that I can tell you for sure, is that you will be MUCH better off with 10% down and a PAR(wholesale) rate for a 80/10 rather than 5% down and buying the rate down. (15%-20% down even better)

Find someone that you can trust, agree on a fixed fee to them, and let them find you the best loan that you actually qualify for. That’s probably the best way to “shop” for a loan.

Anything other than that is what leads to the lies, deceptions, trickery, overcharging, etc that goes on, EVEN when you deal with family & friends. People asked to be fooled and get what they wish for.

Dealing with builders is a whole other game. They try to make a profit from every angle of the transaction, including upgrades and financing. There is no solid generalization, but they also mislead with their rates.
In general, incentives from builders are convenient, but expensive.

Assuming that going directly to a bank gets you the best loan is probably the biggest myth out there. It might be possible,(esp when compared to a slimeball) but if you’re dealing with someone honest, you may have many more options to get a better loan.

Banks DO NOT have to disclose when you are overcharged, brokers DO have to disclose it. It’s the power of the banking industry.

My general advice is don’t strap yourself and be a slave to a mortgage, esp in this market.

Knowing what you need to qualify for a great loan means that you can prepare & plan for it, instead of walking in and getting blindsided.

I’d be happy to speak with you privately about your situation.
Please look for my email. Thanks.

[Author]

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