Mortgage Industry Secrets Revealed

  It only takes a few "Bad Seeds" to ruin an "Entire Crop" 

This page is dedicated towards "Positive Preventative Education" Most Ethical Banks, Lenders or Brokers, would never consider deceiving the public, like some of this material may imply or suggest. Generally, rules are broken by a small percentage of "Individuals"

The Mortgage Industry as a whole is "Honest" Education and Awareness will assure this...

Explanation and Secrets About Points  

"Points" (1 point = 1% of the loan amount) 

Watch Out For All That Deceptive Advertising

Most newspaper or other printed ads regarding Mortgage Interest Rates are just plain "False Advertising" that's why very "Convenient Disclosures" are added (about Points, Costs or fees to the Borrower), Sometimes the advertiser doesn't even bother. To be in "Mortgage Compliance" an Annual Percentage Rate (APR) needs to be displayed, and the Bank, Lender or Broker needs to be able to prove the Advertised Loan may have been "Obtainable" by an actual Consumer (on the date of publishing only) even though, the ad can remain in publication for quite some time. 

Always get and compare (from beginning to end) the Rate, APR / Truth in Lending (TIL) and Good Faith Estimate (GFE) in Writing and check for any "Points" and Fees that seem suspicious.

The "Blue Sky" Effect on Mortgage Loan APR's in Ads

OK, let's say you want to advertise a great APR. 1st, Loans without "Points" or Rebates are used; a lender could pretend they weren't going to charge any. 2nd, Lets make the loan scenario for several million dollars. The "Averaging Effect" would really work nicely in this situation as well. 3rd, Lets pretend that the client had 850 credit scores and you had a "Niche Lender" offering a "Special" for High Score Borrowers. 4th, Lets conveniently leave out a bunch of fees and pretend we weren't going to charge those either. 5th, Of Coarse, we were planning on doing a "Full Documentation loan" for a client that had ample Reserve Assets. "The Sky Is Never as Blue as Those Ads"

I think you get the point, the fact is, "Nobody Really Regulates" - "Truth in Advertising"

TV Ads Get Even More Interesting...

TV ads, Mortgage Lenders and interest rates. Ever notice that at some point they flash you about 20 sentences of disclosures for about 5 seconds?

 1. There's not enough time. 2. Font is too small. 3. Then to insure that your not a "Speed Reader" with "Bionic Vision", they purposely put the Disclosure Text through a "Blurring Process" (Opposite of Sharpen) to "Insure" that it never gets read, even if you record it, and play it "Frame by Frame" Mortgage compliance rules were written 20 years ago by some Genus that left out the word "Readable" when describing Mortgage Disclosure Compliance. Those wonderful Mortgage Regulators have never bothered to properly "Amend" the rule, in all these years, and the practice continues everyday.

These advertisers are deceiving you into thinking that they are a better Mortgage Lender or Broker. All fine print should be clearly readable or don't do business with them, this is not at all honest! You can almost bet your life, they are Disclosing that Points are going to be charged, or that you need extremely good credit to qualify, or both! - Who Knows?

Paying "Points or A Higher Origination Fee?

  A Borrower often calls many Lenders or Brokers to “Shop” their loan. Most Lenders sense this right away, and in trying not to lose the loan, the Loan Originator quotes a “Wholesale Rate” to the Borrower who is on their phone, then goes on to “Sell The Borrower a Payment”, not mentioning the “Points” they plan to charge at closing (in Lou of giving up the Rebate for remaining Wholesale) The Borrower gets to the closing table and sees "Discount Points" on the Good Faith Estimate (GFE) questions it, but is reminded that the payment quoted is accurate as promised. The pressured Borrower agrees, and the transaction closes.

So What Really Happened?

The Borrower got the loan and payment they wanted, but inadvertently financed a larger amount of money, and has a "Higher Pay-Off" then they expected because of the additional charging of “Discount Points” The Loan Originator just called them that. "In Reality", or "Truth in the Matter" is, the Origination or Broker Fee was "Miss-Represented" (to compensate for the lost Rebate) and there was really no "Buydown Benefit" to the Borrower at all. The Originator made up for the "Lost Rebate" in "Bogus Discount Points"

The "Old Bait and Switch"  Deceiving?   Happens Everyday!   Again, ask about all Fees and Points up-front. Don't be afraid to question everything.

Pre-Payment Penalties “Double Whammy”

This may be upsetting to those who had a "Pre-Pay"

In "Most" Mortgage Situations, Pre-Payment Penalties are imposed by the Wholesale Lender, because the Broker is taking a “Rebate” or “YSP” from the Wholesale Lender or Bank, who is paying these fees “Up-Front” to the Broker.  The Wholesale Lender is guaranteed from any potential losses, because they will make the revenue up, in higher interest charged over a guaranteed period of time. (Usually 2-3 years) If you refinance within this period, you have to “Repay the Lender” the Rebate, the Broker got, closing your loan.

With the exception of some "Sub-Prime" Zero Down Loans & other Specialty Loans" always be suspicious of any "Pre-Pay Penalties" 95% of loans won't have them, unless the Broker is getting a substantial Rebate.

  The So Called “No Fee Loans” Yeah Right!

Don’t think for a second there is not a "Catch"

Yes, more advertising deception, almost nothing in life is free! Especially not a mortgage! Don’t fall for this gimmick either. The Wholesale Lender, Bank or Broker simply “Adjusts” the interest rate to compensate. You can almost be guaranteed that you will get trapped into some type of Pre-Payment Penalty Fee, because the Lender will make up this loss (and then some) with every loan payment you make, or with the Penalty Fee. Make no mistake; you will be paying closing costs, sooner or later!

You should expect to pay closing costs that are ethical and appropriate, like any other service. Keep in mind, mortgages are complicated and can take many weeks to complete.

Read this whole page? You may now know more "Secrets" about the Mortgage Industry, then most Realtors!