Interesting podcast on yield spread premium and other dirty mortgage secrets

[mshan]

Don't know if I would use his company for a mortgage, but his website and podcast do seem like a good source for all lot of dirty tricks that mortgage "salespeople" use to hide the truth cost of the loan they are selling you: http://themortgageinsider.net/shows/mortgage-insider-show-3-2-2007.html

-> 90% of loans have yield spread premium
-> Average yield spread premium is 0.5% (i.e. your rate is 0.5% higher than it should be based solely on your qualifications), which triples the mortage seller's profit from the transaction.
-> Banks don't have to disclose yield spread premium, but need to make 3% to cover overhead, etc. and still make a profit. It's called something else by banks and apparently banks got legislation passed so that they don't have to list it on the HUD, while mortgage brokers do (I think any entity that sells and actually underwrites the loan, even if they then resell it to someone else, don't have to itemize it either).
http://en.wikipedia.org/wiki/Yield_spread_premium

 

[shortspanishguy]

Many people do not understand their credit score and how much power they have when they hit 700+. It pays to shop around for your best rate but also make sure you are not getting hit too hard with an origination or discount fee.

If the consumer does not do his homework then too bad.

 

[mshan]

"If the consumer does not do his homework then too bad."

Only way I found out about this podcast was while searching the iTunes Store for podcasts to learn about real estate and mortgages.

Hopefully it will help other newbies like me to safely navigate the shark infested waters that apparently is the mortgage industry (kinda of scary because it makes used car salesmen seem like model citizens. Seems like stockbrokers who work in boiler rooms are the same type of person that you might run into searching for a mortgage loan).

I have no affiliation with the podcasters and am not even certain if I would fully trust them as a loan originator. However, the morgage insider secrets they are spilling seem like info an informed shopper should be aware of.

EDIT: tidbit from 2/23/07 podcast. 87% of people will use Fannie Mae or Freddie Mac loan and should require yield spread premium because of increased risk. I guess the real trick is finding a honest mortgage broker / lender that will provide you an honest good faith estimate (heard previously that there are really no penalties for lying about good faith estimates, so dishonest brokers/lenders just use then to lure you in and assume that when you get all the way to closing you'll just sign it because you've gotten so far). One thing I haven't heard from these podcasters is what a fair fee based commission is fair and reasonable for the salesman of the loan.

EDIT #2: podcaster said should take at least 3/8% off rates listed at hsh.com (apparently collects data on what real loans across the country closed at) to get a ball park idea of what type of rate a good credit risk mortgage shopper should be able to get.