- Jun 12, 2001
You have absolutely no clue whatsoever what you are talking about. None at all.Originally posted by: mshan
I believe the no closing cost loan you referred to typically adds an additional 0.25% (I forgot if rate bump is 0.25% or 0.5%) to the rate, above and beyond the legally allowed to be hidden service release premium.
If you don't have cash on hand and plan in staying on the loan only for a couple years, yes, the 0.25% rate bump in exchange for the lender paying closing costs may make sense. If you plan on keeping the mortgage for a long time, interest on interest will make that 0.25% rate bump much more expensive than just paying the closing costs up front at closing.
I don't have a problem with yield spread premium, or even bank service release premium, as long as it is explicitly and clearly revealed to the borrower when applying for a loan. Why did the banking lobby see it necessary to have laws to pass that allows lenders to hide this service release premium, while any mortgage originator who doesn't (at least temporarily) have the funds for your loan in house, have to reveal the same rate bump, and have it artifically called something else (yield spread premium)?
I believe mortgage brokers had like over 60% market share before savings and loan debacle, and Congress (banking lobby) used the savings and loan debacle to try and destroy low cost mortgage brokers and maintain the high profit margins the banks need (read 3% per loan -> 1% loan origination fee, 2% additional profit via 0.5% bank service release premium rate bump over what you should qualify from; closing costs still additional and no idea how much junk profit is added here) to cover employees, all of those brick and mortar branches, and stock holders who expect ever increasing profits.
With this RESPA law, bank loan officer (unknowing kid who, like salesman at car store, really doesn't know true cost of funds, just numbers on the supposed "wholesale" rate sheet they are given, and has to go to manager who is only one who knows what each vehicle really costs) who only gets $400 commission for completing loan (bank keeps thousands and thousands of extra profit from jacking your rate 0.5% themselves) can legally point blank lie to you (probably doesn't even know it) that they are giving you wholesale rate and show you their rate sheets, which already have bank service release premium built into them.
I suspect this new legislation is designed to kill off the low cost competition (independent mortgage brokers), so banks can later jack rates further, because there is no where else t go except one bank or another (kind of like Lending Tree telling you win when banks compete with each other, you supposedly win. I read that what DiTech supposedly used to do is charge you an upfront, NON-REFUNDABLE (non-charge backable) fee after they quoted you a certain set of fees and rate, but when you get actual documents, terms are higher than what you were lead to believe they would be - except you can't get your credit card to charge back their fee to your account).
Overall, buyer beware irrespective of who you get a mortgage from, but if you don't know what true wholesale rates are, and what reasonable profit margins should be, and generally speaking how much premium you have to pay because you are a blemished borrower, you can really ripped off badly (we're talking thousands or even tens of thousands of dollars of mortgage interest / profits to lender that you probably didn't need to pay):
For example, with no SRP, there is no 0.25% "legally allowable bump."
0.25% to rate translates as 1% in fee (or "1 point") on most conforming mortgage programs. ROI on 1 point is 5 years, not a couple. The average American homeowner, however, refinances or trades his house every 2 years. Your agenda seems to be to have them pay excess upfront fees in order to protect them from the evils of lender-paid fees.
The SRP is not "hidden." If every lender in town is offering one rate, but another lender has a higher rate, exactly what is hidden?
If a loan officer tells you that he can do one program for you at a low rate but with upfront fees, and another program at a slightly higher rate but with no fees, what is being hidden?
"Unknowing kids" in the mortgage industry are quickly being done away with through stricter licensing requirements. Good riddance.
BTW, the website you spammed offered some great advice, but for some strange reason had nothing to say about the clueless drivel you posted here.