Georgia Mortgage FHA

Why does it seem this has become the motto of my own industry? If you live in one of the towns where JS from LF advertises heavily on the radio you’ve heard him say “Don’t give a broker another penny of closing costs to refinance! It’s a racket! It’s a rip-off! Refinance with LF today and we’ll pay your closing costs. Your closing costs won’t cost you one penny and we don’t roll it into the loan!” (paraphrased)

Raise your hand if you believe this is remotely true – I mean that it won’t cost you one penny.

Okay, John, put your hand down.

This is only one of the most misleading statements I hear advertised or see advertised. It’s amazing how some of the bigger companies advertise that they are “the only ones who can do this for you” when you can get the same loan from just about any mortgage broker on any street in America.

Oh, sure. They’ll pay the closing costs out of their commission by raising your interest rate high enough to receive enough Yield Spread Premium to cover those costs. However, let me add, if you are keeping the loan for two years or less this is a smart move.

Here’s another one from the big guys: Fixed closing costs only $495 – go ahead, call them. Then compare their APR with ours. APR is the combined cost of your loan including commissionable points and closing costs over the life of the loan. See, what those huge national advertisers (dot coms) do is raise the interest rate enough to offset your closing costs … same thing the other guy does.

Another funny is that several months ago the JS from LF guy was running his normal ads followed by a help wanted spot touting how his top performers make $400,000 per year. That’s a pretty amazing feat considering he’s paying your closing costs, too!

For anyone to remotely believe that any lender or mortgage broker can operate on anywhere less than an average of $2500 per loan is ridiculous unless they intend for the company to do so without employing top-notch professionals, the correct number of processors and underwriters, equip a facility with the best equipment available so clients aren’t hindered by equipment malfunction, AND to spend the roughly $300 per FILE (closed or not) to chase down mortgage and real estate fraud. Business economics is a big thing to me since I’m charged with keeping things afloat. And let me tell you, at $2500 average per loan there is nothing left over at the end of the year and we are run fairly modestly.

Here are some other ones: Sure, we can close within 24 hours (so can we once you get off your tail bone and get us the docs we need!), Novation can’t do that – only we can (wahooo – I always love that one), (this one is advertised regularly on craigslist): Guaranteed approval 100% financing – pretty sure the reason they don’t put the name of their company, phone number, etc is because that’s definitely lawsuit and criminal activity territory. This one is pretty misleading, too: Online approval in less than 5 minutes (honey, that’s not an approval worth wet smoke – that’s an approval that is only partly as good as your word NOBODY can guarantee your approval online ever – you may, however, accidentally fit the credentials for the loan for which you applied. You still have to be approved, just wait until the broker/lender calls you back and see.)

So I can smell the poopy when my so-called competition is lying to my prospective clients about what they can deliver. The idea the mortgage brokers should not be entitled to yield spread premiums is ludicrous. The idea that brokers, lenders and bankers should all be required to expose YSP is totally acceptable. Currently only brokers are required to do so – although we, as a lender, do the same. I also teach students in my seminars and workshops how to read the HUD-1 to see the exact amount of YSP going to the broker. Unfortunately you can’t do that for most lenders and bankers.

I will say that RESPA desperately needs reform – the idea that any lender or broker can deliver accurate estimates within three days of application is only as honest as the applicant is with the loan originator about their income, assets and property value/details. This is the day of rapid information and it’s time to change. However, GFE’s are the greatest form of lying I have seen in the industry.

We often have a client who tells us a broker or another lender can beat our pricing (often by some ridiculous figure) so we do what anyone else does and ask them to show us a GFE/TIL (most of the time we never see a TIL so the most important part of the information is missing). The GFE’s are routinely incomplete and with rates quoted that don’t even exist.

So what should you do as a buyer or agent advising your client?

(A) Know what you’re talking about with rates and the true costs to close a loan
(B) Verify from two or three sources that the estimates are fair if not completely accurate
(C) Be skeptical, at best, of what any LO is telling you especially if it’s out of line with what others say

UNLIKE SOME FOLKS (wink wink) I do not think that the mortgage industry is totally corrupt. It is, however, a soured soup if taken all in one bowl. There are several litmus tests which I will blog soon. Right now my stomach is boss and I’ve written another one of those blog postings that makes my attorney say, “Expletive! Ken, what the expletive are you expletive thinking? You can’t expletive single expletive handedly expletive clean up the expletive mortgage industry!”

Transparency – YES! Price control HECK NO! Educated borrowers – YOU BET! I educate for free, regularly.

— admin