A mortage broker threatened to beat my face in.
About (2) years ago I was out jogging when this bulldog- look'n
dog chased me. I stopped and faced the thing, which stopped and
proceeded to growl.
The owner yells from about 200 feet away "he won't bite
you."
I hate dogs and I hate people who let their dogs run loose.
I yelled back, "It damn-well better not."
At that point the jerk starts to walk towards me and threatenes
to beat my face in. I told him to bring it on. He backed off.
So I started to do some research on the guy. Turns out he owns
a little mortgage broker outfit, about a (6) person office including
his wife who answers the phones.
Not long afterwards he moves from the house he was in and I
track him down in a bigger, fancier house a couple miles away.
Driving an Escalade.
A few months ago I noticed his mortgage broker website is
down and the phone disconnected.
Tonight I found where his newer, bigger house had been repo-ed
on Sept 19. He (and wife) bought it for $582,000.00 in Oct 2005,
and the principal and accrued interest owed as of the forclosure
date is $495,000.00
Considering the money mortage brokers were making, I am
surprised he didn't pay cash.
Anyway, couldn't have happened to a nicer guy.
Wonder if he still has the Escalade?
Replies
120
SoWal Insider
In Florida, mortgage brokers are required to report the exact dollar amount of YSP at least three days prior to closing. The current law does not require they specify the exact dollar amount of YSP up front, only that they disclose prior to closing. This means that consumers will not know exactly what they are paying the broker (even if they know how the system works) until the broker discloses the information. This usually occurs just prior to closing.
The broker knows how much he wants to make and will choose the product that serves his needs.
So you're saying that you went to a Broker and he picked your loan product for you like parents select a child's clothing? Funny, my clients know exactly what loan product they want like a fixed 30 or 40, an adjustable, etc. or we may discuss all available options, but I have never just selected a loan product out of a hat for someone.
As far as the BA goes, it's the same game... you are correct that the broker fee is disclosed, but not in exact dollar amounts, only ranges in percentage terms. As a consumer, how would you like a broker to tell you that he may make between 0% and 2% of your loan amount? What is it going to be? I want the broker to do it for free, but he wants to do it for the max possible.I suppose if your employer asked you to work for free you would comply then? There is a range because in some transactions the consumer may buydown their interest rate with points which means you would be paying a Broker Fee, and you would know exactly at time of lock how much the Broker was earning on that loan. They are getting wholesale rates, so I suppose you want them to do your loan for free? You had the option of pulling your loan and going elsewhere if you were not happy with the rate and terms.
On the day I locked, I told my broker that I wanted him to disclose the exact dollar amount of YSP on the GFE prior to my signing of the application. He complied. Additionally, I required he provide me a copy of the lock confirmation, which he did. Once I had confirmation that everything was kosher, I negotiated the YSP.Congratulations, that's like going to a Ball game, agreeing to pay the price of a box seat ticket, then asking for a refund because you think the ball players are compensated too much.
I am curious why you went to a mortgage broker at all if you do not like the disclosure process of Brokers?
I'm guessing it's because the Banks do not have to disclose their income to the consumer, just provide a rate lock agreement and you couldn't dip your hands in their pocket.
This whole thread has made me feel the need for a shower.
Edited
SWGB
I think the only thing about this thread, including the original post, that qualified it to be about R&D, was the fact that it was placed in the R&D forum.
It went to the dogs, but that is OK, since it started out that way.
Highlights- Miss Kitty "bitter party of one", Skunky posting an unrelated link about snow, and Diane's smilie-engorged post about dogs. I have no idea what she said, either. So ^5 everyone and carry on!
Well it may not be the most intelligent thread, lord knows we've all started some doozies :roll:, but it was about a mortgage broker going under. You know something positive for the holidays, and that would be related to real estate right?
*Disclaimer: Not defending the thread starter just pointing out it was distantly related to real estate. We don't have a smile at someone else's pain category.
SoWal Insider
Well it may not be the most intelligent thread, lord knows we've all started some doozies :roll:, but it was about a mortgage broker going under. You know something positive for the holidays, and that would be related to real estate right?
*Disclaimer: Not defending the thread starter just pointing out it was distantly related to real estate. We don't have a smile at someone else's pain category.
:roll: I hope you're kidding right?
SWGB
Oh sorry Mango, that should have been one part sarcasm "you know something positive for the holidays" and one part trying to clarify that a mortgage broker is related to real estate.
Did that clear it up or did I mess it up more?
Did that clear it up or did I mess it up more?
SoWal Insider
Oh sorry Mango, that should have been one part sarcasm "you know something positive for the holidays" and one part trying to clarify that a mortgage broker is related to real estate.
Did that clear it up or did I mess it up more?
Gotcha. here's something positive for the Holidays. (being how this thread is practically useless anyway) I bought one of these today. They make me crack up.
Cube Men. I got Global Getaway. A big wave comes in and the cube dude hangs from a tree. Recently he just tooted. Gotta love a man in a box.
Beach Lover
Mango:
Sounds like I struck a nerve. From early on in the process I realized I was dealing with a broker that was playing the game. Therefore, I needed to proceed with caution.
"So you're saying that you went to a Broker and he picked your loan product for you like parents select a child's clothing? Funny, my clients know exactly what loan product they want like a fixed 30 or 40, an adjustable, etc. or we may discuss all available options, but I have never just selected a loan product out of a hat for someone."
I'll ignore the fact that your response is rude and explain what I mean.
When I told the broker I was looking for a 7/1 ARM, he reviewed his rate sheet, which was unavailable to me. I will assume that you understand that the rate sheet shows a variety of lenders that are offering 7/1 ARM's with differing YSP amounts. From the brokers perspective, he was looking for a lender that would offer a relatively low rate with a relatively high payback. Then he would choose the lender that met his needs, while meeting my needs for a 7/1 ARM. He did not want to disclose up front what the product he chose paid.
"I suppose if your employer asked you to work for free you would comply then?"
Once again, you seem to misunderstand my point. I was speaking about the negotiation process. Of course, I couldn't reasonably expect a broker to do the deal for free. Rather, I was pointing out the fact that there was no resolution at that point regarding the fee the broker was going to receive for doing the deal. A posted range of fees does not help me know what I am actually paying.
"There is a range because in some transactions the consumer may buydown their interest rate with points which means you would be paying a Broker Fee, and you would know exactly at time of lock how much the Broker was earning on that loan."
I am not talking about discount points, which would be clearly disclosed on line 802 of the GFE. Are you really a broker?
On the day that I locked, the broker knew exactly which lender he was going to use; therefore, the YSP was known to him at that time. Just because the YSP was known to him at that time, does not mean that he was required to disclose the specific amount on the GFE. The law says as long as he discloses the amount three days prior to closing, he is in compliance. My broker did not want to disclose at the time he "locked" my rate.
"You had the option of pulling your loan and going elsewhere if you were not happy with the rate and terms."
Exactly; however, I would go through the same process if I called around to other brokers. Why waste time if I end up with the product and terms that is acceptable to me? Further, I could have called a variety of lenders directly, but did not want to spend the time doing so.
"Congratulations, that's like going to a Ball game, agreeing to pay the price of a box seat ticket, then asking for a refund because you think the ball players are compensated too much."
Irrelevant point. You forget the YSP is my money and not the brokers. He wanted to help himself to all of it, but I wanted some of it back. Negotiation is prudent. Additionally, I needed a copy of the rate lock confirmation to ensure that the broker wasn't telling me one thing and doing another. With this broker, I needed to verify everything given my experience up to that point in time.
"I am curious why you went to a mortgage broker at all if you do not like the disclosure process of Brokers? I'm guessing it's because the Banks do not have to disclose their income to the consumer, just provide a rate lock agreement and you couldn't dip your hands in their pocket."
Granted, had the broker disclosed everything up front, it would have been a smoother process. However; as mentioned above, I went to a broker to save me from having to shop a variety of lenders directly.
Hope that answers your questions.
Little Fish
Sounds like I struck a nerve. From early on in the process I realized I was dealing with a broker that was playing the game. Therefore, I needed to proceed with caution.
"So you're saying that you went to a Broker and he picked your loan product for you like parents select a child's clothing? Funny, my clients know exactly what loan product they want like a fixed 30 or 40, an adjustable, etc. or we may discuss all available options, but I have never just selected a loan product out of a hat for someone."
I'll ignore the fact that your response is rude and explain what I mean.
When I told the broker I was looking for a 7/1 ARM, he reviewed his rate sheet, which was unavailable to me. I will assume that you understand that the rate sheet shows a variety of lenders that are offering 7/1 ARM's with differing YSP amounts. From the brokers perspective, he was looking for a lender that would offer a relatively low rate with a relatively high payback. Then he would choose the lender that met his needs, while meeting my needs for a 7/1 ARM. He did not want to disclose up front what the product he chose paid.
"I suppose if your employer asked you to work for free you would comply then?"
Once again, you seem to misunderstand my point. I was speaking about the negotiation process. Of course, I couldn't reasonably expect a broker to do the deal for free. Rather, I was pointing out the fact that there was no resolution at that point regarding the fee the broker was going to receive for doing the deal. A posted range of fees does not help me know what I am actually paying.
"There is a range because in some transactions the consumer may buydown their interest rate with points which means you would be paying a Broker Fee, and you would know exactly at time of lock how much the Broker was earning on that loan."
I am not talking about discount points, which would be clearly disclosed on line 802 of the GFE. Are you really a broker?
On the day that I locked, the broker knew exactly which lender he was going to use; therefore, the YSP was known to him at that time. Just because the YSP was known to him at that time, does not mean that he was required to disclose the specific amount on the GFE. The law says as long as he discloses the amount three days prior to closing, he is in compliance. My broker did not want to disclose at the time he "locked" my rate.
"You had the option of pulling your loan and going elsewhere if you were not happy with the rate and terms."
Exactly; however, I would go through the same process if I called around to other brokers. Why waste time if I end up with the product and terms that is acceptable to me? Further, I could have called a variety of lenders directly, but did not want to spend the time doing so.
"Congratulations, that's like going to a Ball game, agreeing to pay the price of a box seat ticket, then asking for a refund because you think the ball players are compensated too much."
Irrelevant point. You forget the YSP is my money and not the brokers. He wanted to help himself to all of it, but I wanted some of it back. Negotiation is prudent. Additionally, I needed a copy of the rate lock confirmation to ensure that the broker wasn't telling me one thing and doing another. With this broker, I needed to verify everything given my experience up to that point in time.
"I am curious why you went to a mortgage broker at all if you do not like the disclosure process of Brokers? I'm guessing it's because the Banks do not have to disclose their income to the consumer, just provide a rate lock agreement and you couldn't dip your hands in their pocket."
Granted, had the broker disclosed everything up front, it would have been a smoother process. However; as mentioned above, I went to a broker to save me from having to shop a variety of lenders directly.
Hope that answers your questions.
Little Fish
SoWal Insider
Little Fish:
YSP is NOT yours. It is an arrangement between the wholesaler and the brokers of which they also have a legal agreement between the two for loss mitigation, consumer fraud, and other liabilities, all of which you, the consumer are not bearing.
You could have easily called a whole slew of brokers, Lenders and Banks prior to/at application to see who had the lowest APR. Meaning if all had the same rate, but XYZ was offering closing costs in addition, thus lowering your APR. If one doesn't understand APR, a comparison of the GFE is easy enough to do line by line since they are all the same. You could have also requested a fixed YSP, no more than 1 point for example, and if the Broker agreed, you proceed forward.
You didn't do any of that though.
Working with a mortgage professional is not just always about price and terms. It's about communicating with someone who is arranging the financing and getting you to the closing table with the least amount of stress. One who has extensive knowledge of the industry as a whole to assist with any of the potential glitches that can arise, and believe me, not all transactions are slam dunks. There are many things that go awry that are outside a brokers control.
YSP is NOT yours. It is an arrangement between the wholesaler and the brokers of which they also have a legal agreement between the two for loss mitigation, consumer fraud, and other liabilities, all of which you, the consumer are not bearing.
You could have easily called a whole slew of brokers, Lenders and Banks prior to/at application to see who had the lowest APR. Meaning if all had the same rate, but XYZ was offering closing costs in addition, thus lowering your APR. If one doesn't understand APR, a comparison of the GFE is easy enough to do line by line since they are all the same. You could have also requested a fixed YSP, no more than 1 point for example, and if the Broker agreed, you proceed forward.
You didn't do any of that though.
Working with a mortgage professional is not just always about price and terms. It's about communicating with someone who is arranging the financing and getting you to the closing table with the least amount of stress. One who has extensive knowledge of the industry as a whole to assist with any of the potential glitches that can arise, and believe me, not all transactions are slam dunks. There are many things that go awry that are outside a brokers control.
Edited
Beach Comber
Not sure the wholesale bankers / investors will focus their investment dollars and organizational energy in entering the retail brokerage business in a large way, that being grabbing more than say ... 80% of the market. However, I do not know the percentage of home and commercial loans processed thru brokers vs. directly by lenders. Do you have any historical data, perhaps showing trends and analysis?
The Mortgage Broker industry is clearly in the crosshairs of the Banking Industry. The banks will say or do anything to take the spotlight off of themselves as playing a part in the subprime meltdown.
The <honest portion of the> Mortgage Broker Industry did itself a HUGE disservice by not speaking up and doing something about all the fraud and corruption going on in their industry during the RE frenzy, thereby labeling themselves guilty by omission. (At least the Appraisers attempted to do this with a petition {http://appraiserspetition.com} started in the early stages of the bubble.)
Banks will have no problems convincing the masses <rightly or wrongly> that mortgage brokers are at the epicenter of the subprime problem. They need to sully the reputation of the competition because, since it has become more difficult to unload mortgages into the market, banks have lost a huge revenue-generating machine. Going forward I think banks will attempt to take back the business (and fees) of mortgage lending from the street and, coupled with stronger regulation by the government, the Mortgage Broker industry as we know it will fade away.
.
Beach Fanatic
You go, Mango!
Little Fish:
YSP is NOT yours. It is an arrangement between the wholesaler and the brokers of which they also have a legal agreement between the two for loss mitigation, consumer fraud, and other liabilities, all of which you, the consumer are not bearing.
You could have easily called a whole slew of brokers, Lenders and Banks prior to/at application to see who had the lowest APR. Meaning if all had the same rate, but XYZ was offering closing costs in addition, thus lowering your APR. If one doesn't understand APR, a comparison of the GFE is easy enough to do line by line since they are all the same. You could have also requested a fixed YSP, no more than 1 point for example, and if the Broker agreed, you proceed forward.
You didn't do any of that though.
Working with a mortgage professional is not just always about price and terms. It's about communicating with someone who is arranging the financing and getting you to the closing table with the least amount of stress. One who has extensive knowledge of the industry as a whole to assist with any of the potential glitches that can arise, and believe me, not all transactions are slam dunks. There are many things that go awry that are outside a brokers control.
SoWal Insider
.
I see nothing wrong with the deal between Little Fish and his mortgage broker. Apparently the broker agreed to the deal as he also had an opportunity of kicking Little Fish's offer to the curb--but didn't.
.
I see nothing wrong with the deal between Little Fish and his mortgage broker. Apparently the broker agreed to the deal as he also had an opportunity of kicking Little Fish's offer to the curb--but didn't.
.
Beach Lover
Mango:
You said, "working with a mortgage professional is not just always about price and terms. It's about communicating with someone who is arranging the financing and getting you to the closing table with the least amount of stress."
"Not always about price and terms"... your comment is absurd. Many brokers are concerned primarily for their own paycheck and their goal is to ensure the client makes it through a successful closing to secure their own pay. Am I to assume (as a consumer) that every broker is looking out for my benefit? I don't believe so. Hopefully, nobody else does.
We all know that a mortgage is simply a commodity... every bank offers one. From Econ 101 you learn that when you offer a commodity the only way to compete is on price. Therefore, I don't care who will hold my hand; rather, I care about securing the best terms. In my case, I was happy with the outcome.
Little Fish
You said, "working with a mortgage professional is not just always about price and terms. It's about communicating with someone who is arranging the financing and getting you to the closing table with the least amount of stress."
"Not always about price and terms"... your comment is absurd. Many brokers are concerned primarily for their own paycheck and their goal is to ensure the client makes it through a successful closing to secure their own pay. Am I to assume (as a consumer) that every broker is looking out for my benefit? I don't believe so. Hopefully, nobody else does.
We all know that a mortgage is simply a commodity... every bank offers one. From Econ 101 you learn that when you offer a commodity the only way to compete is on price. Therefore, I don't care who will hold my hand; rather, I care about securing the best terms. In my case, I was happy with the outcome.
Little Fish
Beach Fanatic
Was he "for real"
I have wondered the exact thing about you, from the very first post I ever read. Still wondering and hoping that the answer is "not".
I can say that there are very few realtors on this forum I would consider even buying a dog house from, considering the behavior shared here.
SoWal Insider
.
I see nothing wrong with the deal between Little Fish and his mortgage broker. Apparently the broker agreed to the deal as he also had an opportunity of kicking Little Fish's offer to the curb--but didn't.
.
I didn't say that there was anything wrong with the deal amongst Little Fish and his broker, but he stated:
"Personally, I support doing away with YSP as this has been a tool used by many brokers to conceal commissions, which leads to bad deals for consumers."
He then proceeds to disclose that he benefited from it. He didn't support his statement. He could have easily just paid a flat Broker Fee and requested no YSP be earned. He didn't.
Edited
SoWal Insider
What the heck....in honor of the Paulsonomics U.S. Mortgage Bailout now is as good a time as any for the "I Love Subprime" karaoke sing-a-long (Balloons, beverages and snacks courtesy of Lehman Bros. and Countrywide)
[ame="http://www.youtube.com/watch?v=NkEwdg1VP_c"]YouTube - I Love Subprime[/ame]
[ame="http://www.youtube.com/watch?v=ljHjZpC7bnc"]YouTube - Mortgage Servicing Pie[/ame]
.
[ame="http://www.youtube.com/watch?v=NkEwdg1VP_c"]YouTube - I Love Subprime[/ame]
[ame="http://www.youtube.com/watch?v=ljHjZpC7bnc"]YouTube - Mortgage Servicing Pie[/ame]
.
Edited
SoWal Insider
Mango:I said it's not just about rate and term. I'm sorry you feel that all brokers are all about padding their pockets. Based on the cards and letters on my desk from past clients, they would beg to differ.
You said, "working with a mortgage professional is not just always about price and terms. It's about communicating with someone who is arranging the financing and getting you to the closing table with the least amount of stress."
"Not always about price and terms"... your comment is absurd. Many brokers are concerned primarily for their own paycheck and their goal is to ensure the client makes it through a successful closing to secure their own pay. Am I to assume (as a consumer) that every broker is looking out for my benefit? I don't believe so. Hopefully, nobody else does.
We all know that a mortgage is simply a commodity... every bank offers one. From Econ 101 you learn that when you offer a commodity the only way to compete is on price. Therefore, I don't care who will hold my hand; rather, I care about securing the best terms. In my case, I was happy with the outcome.
Little Fish
You said every Bank offers a mortgage, but you chose a mortgage Broker instead of going to a Bank instead who by law isn't required to disclose to you their profit on the sale of the loan and servicing rights.
Interesting..... but you are anti YSP.
Catching to the chase, what you did was call a Broker becuase they had knowledge of all the Lenders and who had the best price and you wanted to milk this information from the Broker.
Edited
SoWal Insider
Mango:It's all about you.
You said, "working with a mortgage professional is not just always about price and terms. It's about communicating with someone who is arranging the financing and getting you to the closing table with the least amount of stress."
"Not always about price and terms"... your comment is absurd. Many brokers are concerned primarily for their own paycheck and their goal is to ensure the client makes it through a successful closing to secure their own pay. Am I to assume (as a consumer) that every broker is looking out for my benefit? I don't believe so. Hopefully, nobody else does.
We all know that a mortgage is simply a commodity... every bank offers one. From Econ 101 you learn that when you offer a commodity the only way to compete is on price. Therefore, I don't care who will hold my hand; rather, I care about securing the best terms. In my case, I was happy with the outcome.
Little Fish
Beach Lover
Good Morning All! Can't wait to spend another day responding to all of your questions/comments regarding YSP...
Congress has been considering doing away with YSP, not because it is a good thing, but because Congress recognizes that the system has been fraught with abuse. The Mortgage Brokerage Industry has been fighting tooth and nail to defeat the legislation because they have a lot to lose. They have won temporarily.
We ended up disecting my personal experience partly because the only way to discuss the matter is by using a real example. Additionally, I thought it expedient as a teaching method to benefit those who never realized how the system worked and how they could secure better terms in the future. I wonder how many people out there realized that they could use YSP as I have described in prior posts?
Further, if YSP wasn't my money, why would my broker agree to pay me a portion of it and settle for a lower fee? If it was his money, why wouldn't he "kick me to the curb" as was described in a prior post? In the end, we both agreed our deal was fair to both. What is wrong with that?
I am glad to hear Mango has received positive feedback from her clients. I wonder what percentage of her clients have no idea they paid too much? If you can buy a $25K car for $20K, you feel really good... until you discover you could have bought it for $15K. I guess it is true what they say, "ignorance is bliss".
And as far as Bob's comment goes... I hope you have also benefited from this discussion so you can secure better terms the next time you find yourself needing a loan. It is not "all about me" after all. It is all about all of you.
Little Fish
Congress has been considering doing away with YSP, not because it is a good thing, but because Congress recognizes that the system has been fraught with abuse. The Mortgage Brokerage Industry has been fighting tooth and nail to defeat the legislation because they have a lot to lose. They have won temporarily.
We ended up disecting my personal experience partly because the only way to discuss the matter is by using a real example. Additionally, I thought it expedient as a teaching method to benefit those who never realized how the system worked and how they could secure better terms in the future. I wonder how many people out there realized that they could use YSP as I have described in prior posts?
Further, if YSP wasn't my money, why would my broker agree to pay me a portion of it and settle for a lower fee? If it was his money, why wouldn't he "kick me to the curb" as was described in a prior post? In the end, we both agreed our deal was fair to both. What is wrong with that?
I am glad to hear Mango has received positive feedback from her clients. I wonder what percentage of her clients have no idea they paid too much? If you can buy a $25K car for $20K, you feel really good... until you discover you could have bought it for $15K. I guess it is true what they say, "ignorance is bliss".
And as far as Bob's comment goes... I hope you have also benefited from this discussion so you can secure better terms the next time you find yourself needing a loan. It is not "all about me" after all. It is all about all of you.
Little Fish
SoWal Insider
Little Fish:
You told your story, but realistically, we haven't dissected it, and you haven't been completely forthright. How do I know this?, 20 yrs in the business.
First of all when you were quoted a rate and locked it in, and if you truly knew the prevailing rate for your loan type, and the Broker was making an additional full point in YSP that you were able to negotiate, that rate must have been considerably higher than market. Brokers all work off the same rate sheet from different Banks. Your Broker did not have a magical rate sheet that gave him 1 whole point different than lets say the Broker down the street aligned with the same Bank. Why you accepted that rate is beyond me. Even the fact that you requested a 7/1 ARM rings bells. The spread between a 7/1 and a 30 yr fixed is practically nil, and at some Banks the rate is even higher than a 30 year fixed. Why would any informed consumer take a 7/1 ARM if they can have a fixed rate for the same money? I also believe you were looking for an interest only ARM which you failed to mention.
Frankly I believe you are telling Fish Tales here, and if you aren't, I hope you aren't one of those people benefitting from Paulson's bailout plan in the future.
You told your story, but realistically, we haven't dissected it, and you haven't been completely forthright. How do I know this?, 20 yrs in the business.
First of all when you were quoted a rate and locked it in, and if you truly knew the prevailing rate for your loan type, and the Broker was making an additional full point in YSP that you were able to negotiate, that rate must have been considerably higher than market. Brokers all work off the same rate sheet from different Banks. Your Broker did not have a magical rate sheet that gave him 1 whole point different than lets say the Broker down the street aligned with the same Bank. Why you accepted that rate is beyond me. Even the fact that you requested a 7/1 ARM rings bells. The spread between a 7/1 and a 30 yr fixed is practically nil, and at some Banks the rate is even higher than a 30 year fixed. Why would any informed consumer take a 7/1 ARM if they can have a fixed rate for the same money? I also believe you were looking for an interest only ARM which you failed to mention.
Frankly I believe you are telling Fish Tales here, and if you aren't, I hope you aren't one of those people benefitting from Paulson's bailout plan in the future.
Edited
Beach Lover
Mango:
"Haven't been forthright"... I'm sorry but you are dead wrong. I am not spinning "fish tales". I guess 20 years in the business doesn't account for much.
Let me be very specific. On November 26 (late afternoon) I locked at 6.125% on a 7/1 IO ARM with Chase Bank. Unfortunately, I don't have my docs with me or I would also share my margin and caps. That said, I believe it was a 5/2/5. There was zero points and zero origination fee.
November 26 was the day the market tanked 300 points and 10 yr. TSY Yields dropped significantly from around 4% to 3.85%. At that time, my broker told me 30 yr. rates were around 6.5%, which seemed relatively unattractive at that time. It was a perfect opportunity to lock, so that was what I did.
"Why would an informed consumer choose a 7/1 ARM over a 30 yr. fixed rate"? From my perspective, I don't need a 30 yr. fixed rate as I will rent the property for a few years and then 1031 into another property when the real estate market has recovered. Additionally, I do not want to make principal payments, as my goal is to get as close to breakeven on a cash flow basis as possible. A fully amortizing 30 yr. loan consumes more cash than I feel I need to spend in order to ensure a good return on my investment.
On the day I locked, lenders repriced several times. According to my broker, Chase offered the best deal on a 7/1 IO ARM, so I told him to lock me in. After I was locked, I asked him to disclose the YSP. He said, and disclosed on the GFE, that Chase was paying 1 point on my loan of roughly $600K. I told him I was only willing to pay him $3K out of YSP for doing the deal, but he negotiated me upward slightly. He applied the remaining YSP toward my closing costs and I signed the documents.
As far as Paulson's plan goes, it only applies to subprime borrowers, of which, I am not one. However, if I was a subprime borrower, it sure would feel good to know I could get bailed out if my investment didn't turn out as expected.
Anything else?
Little Fish
"Haven't been forthright"... I'm sorry but you are dead wrong. I am not spinning "fish tales". I guess 20 years in the business doesn't account for much.
Let me be very specific. On November 26 (late afternoon) I locked at 6.125% on a 7/1 IO ARM with Chase Bank. Unfortunately, I don't have my docs with me or I would also share my margin and caps. That said, I believe it was a 5/2/5. There was zero points and zero origination fee.
November 26 was the day the market tanked 300 points and 10 yr. TSY Yields dropped significantly from around 4% to 3.85%. At that time, my broker told me 30 yr. rates were around 6.5%, which seemed relatively unattractive at that time. It was a perfect opportunity to lock, so that was what I did.
"Why would an informed consumer choose a 7/1 ARM over a 30 yr. fixed rate"? From my perspective, I don't need a 30 yr. fixed rate as I will rent the property for a few years and then 1031 into another property when the real estate market has recovered. Additionally, I do not want to make principal payments, as my goal is to get as close to breakeven on a cash flow basis as possible. A fully amortizing 30 yr. loan consumes more cash than I feel I need to spend in order to ensure a good return on my investment.
On the day I locked, lenders repriced several times. According to my broker, Chase offered the best deal on a 7/1 IO ARM, so I told him to lock me in. After I was locked, I asked him to disclose the YSP. He said, and disclosed on the GFE, that Chase was paying 1 point on my loan of roughly $600K. I told him I was only willing to pay him $3K out of YSP for doing the deal, but he negotiated me upward slightly. He applied the remaining YSP toward my closing costs and I signed the documents.
As far as Paulson's plan goes, it only applies to subprime borrowers, of which, I am not one. However, if I was a subprime borrower, it sure would feel good to know I could get bailed out if my investment didn't turn out as expected.
Anything else?
Little Fish
SoWal Insider
On the day I locked, lenders repriced several times. According to my broker, Chase offered the best deal on a 7/1 IO ARM, so I told him to lock me in. After I was locked, I asked him to disclose the YSP. He said, and disclosed on the GFE, that Chase was paying 1 point on my loan of roughly $600K. I told him I was only willing to pay him $3K out of YSP for doing the deal, but he negotiated me upward slightly. He applied the remaining YSP toward my closing costs and I signed the documents.
As far as Paulson's plan goes, it only applies to subprime borrowers, of which, I am not one. However, if I was a subprime borrower, it sure would feel good to know I could get bailed out if my investment didn't turn out as expected.
Little Fish
This is where I take issue with your transaction. Why didn't you at application make it clear what you were willing to pay or what you felt was justified income to the Broker? You could have signed a Broker Fee Agreement stating you wanted to only pay $3000 in Broker Fee and ask for 0 to be put for YSP. You could have shopped the rate to see if you could get a lower rate where their YSP would have been .50 point. I'm betting you had already done that and got kicked to the curb by other Brokers. If your loan was already in process when you locked, you wasted your time and your Brokers by not being forthright, but probably at that point decided he had already invested enough time on you, give you what you ask so he could move on to the next loan. So who was playing the game here? It worked out for both of y'all in the end you claim, but I can tell you 1 point is not unreasonable in this credit environment to get an interest only investment property through underwriting when Banks are foreclosing by leaps and bounds on past speculators, yet you have tried to insinuate that Brokers are raping their clients with YSP.
What about the guy who is looking to buy his first primary residence, only has 10% and is slightly short of closing costs. Wouldn't YSP be a way a Broker could help him get into a house if he qualifies from a debt ratio standpoint? I am sure you don't care though based on your last statement regarding bailout.
Edited
Beach Fanatic
Mango,
Seems to me, that you seem to have a better understanding of the industry, than LF. Ya gotta love a person standing up for what they feel, is right!
Seems to me, that you seem to have a better understanding of the industry, than LF.
Ya gotta love a person standing up for what they feel, is right!This is where I take issue with your transaction. Why didn't you at application make it clear what you were willing to pay or what you felt was justified income to the Broker? You could have signed a Broker Fee Agreement stating you wanted to only pay $3000 in Broker Fee and ask for 0 to be put for YSP. You could have shopped the rate to see if you could get a lower rate where their YSP would have been .50 point. I'm betting you had already done that and got kicked to the curb by other Brokers. If your loan was already in process when you locked, you wasted your time and your Brokers by not being forthright, but probably at that point decided he had already invested enough time on you, give you what you ask so he could move on to the next loan. So who was playing the game here? It worked out for both of y'all in the end you claim, but I can tell you 1 point is not unreasonable in this credit environment to get an interest only investment property through underwriting when Banks are foreclosing by leaps and bounds on past speculators, yet you have tried to insinuate that Brokers are raping their clients with YSP.
What about the guy who is looking to buy his first primary residence, only has 10% and is slightly short of closing costs. Wouldn't YSP be a way a Broker could help him get into a house if he qualifies from a debt ratio standpoint? I am sure you don't care though based on your last statement regarding bailout.
SoWal Insider
This is where I take issue with your transaction. Why didn't you at application make it clear what you were willing to pay or what you felt was justified income to the Broker? You could have signed a Broker Fee Agreement stating you wanted to only pay $3000 in Broker Fee and ask for 0 to be put for YSP. You could have shopped the rate to see if you could get a lower rate where their YSP would have been .50 point. I'm betting you had already done that and got kicked to the curb by other Brokers. If your loan was already in process when you locked, you wasted your time and your Brokers by not being forthright, but probably at that point decided he had already invested enough time on you, give you what you ask so he could move on to the next loan. So who was playing the game here? It worked out for both of y'all in the end you claim, but I can tell you 1 point is not unreasonable in this credit environment to get an interest only investment property through underwriting when Banks are foreclosing by leaps and bounds on past speculators, yet you have tried to insinuate that Brokers are raping their clients with YSP.Little Fish, That's a very revealing "look what I did post". On the one hand you trash brokers, then you use the hell out of one on an I/O investment property transaction to mitigate your closing costs. A banker would have kicked you out the front door on the whole deal with no disclosure of their own institutional yield. That you would blind side your broker to participate in his/hers renumeration shows your the kind of guy who deserves a few curb marks. Assume the position please.
What about the guy who is looking to buy his first primary residence, only has 10% and is slightly short of closing costs. Wouldn't YSP be a way a Broker could help him get into a house if he qualifies from a debt ratio standpoint? I am sure you don't care though based on your last statement regarding bailout.
Beach Lover
Mango:
In the spirit of full disclosure...
The reason I didn't tell the broker what I was willing to pay at application, was because at that time, I had no clue how YSP worked, or what my broker was going to earn. This was the first time I've ever gone through a broker to secure financing. The broker I am working with was a referral from a friend, so I decided to do things differently this time and gave him a call.
When my broker provided the first GFE, several days before I ended up locking, I was lead to believe there was no direct compensation to the broker other than the junk fees. He did not explain YSP to me.
Since I was looking at a GFE that seemed to indicate very low fees, I wanted to check with someone who could understand and explain exactly what I would be signing. Therefore, I recalled that my sister in Sarasota was dating a mortgage broker who owned his own business. I gave him a call and asked him to explain what I was signing.
That was when I learned about how YSP worked. He taught me how to negotiate with the broker. He explained to me that YSP was my money and that I could pay the broker out of YSP, use it toward closing costs, or do some combination of both. He said in this environment, with my credit score, etc., every Bank was looking to do the deal with me. He said I didn't need to deal with Brokers, but should call lenders directly. I told him I didn't have the time to call around and compare rates and terms.
He was the one that explained to me that reasonable compensation for a deal of my size is roughly $3K (1/2 point). He said in today's environment, brokers would do it for even less. I was not looking to screw the broker, but was attempting to improve my deal and provide him fair compensation for his efforts.
I never insinuated that all brokers are rapng their clients, only that many of them do not disclose to their clients how YSP works and how they can use it to benefit their situation. My broker was silent regarding this issue which meant that he intended to take 100% of the YSP without as much as a discussion. There would have been no negotiation if I hadn't learned of the system while going through this process.
Coincidentally, after the deal was finalized, I went back to my friend who made the referral and asked him about YSP. He said he had never heard of it and then went on to say that he worked with this broker on three separate occassions in the past. I guess the broker never disclosed this to him either.
Additionally, I asked folks around my office if they knew how YSP worked and no one did. That tells me that many brokers are not explaining YSP to their clients, which also means, clients haven't received the best deals that they could have.
Since it occurs to me that the system is misunderstood by many, if not most, I believe it would be better to do away with YSP altogether and disclose the broker fee on line 802 of the GFE.
As for your example of the first time homebuyer without enough funds... I agree the YSP system can help him.
That said, my only problem is with the nondisclosure of YSP in terms that the average person can understand. If a prospect understands the fee and accepts the terms, there is no problem. However, it's an entirely different matter when the prospect has no clue.
Little Fish
In the spirit of full disclosure...
The reason I didn't tell the broker what I was willing to pay at application, was because at that time, I had no clue how YSP worked, or what my broker was going to earn. This was the first time I've ever gone through a broker to secure financing. The broker I am working with was a referral from a friend, so I decided to do things differently this time and gave him a call.
When my broker provided the first GFE, several days before I ended up locking, I was lead to believe there was no direct compensation to the broker other than the junk fees. He did not explain YSP to me.
Since I was looking at a GFE that seemed to indicate very low fees, I wanted to check with someone who could understand and explain exactly what I would be signing. Therefore, I recalled that my sister in Sarasota was dating a mortgage broker who owned his own business. I gave him a call and asked him to explain what I was signing.
That was when I learned about how YSP worked. He taught me how to negotiate with the broker. He explained to me that YSP was my money and that I could pay the broker out of YSP, use it toward closing costs, or do some combination of both. He said in this environment, with my credit score, etc., every Bank was looking to do the deal with me. He said I didn't need to deal with Brokers, but should call lenders directly. I told him I didn't have the time to call around and compare rates and terms.
He was the one that explained to me that reasonable compensation for a deal of my size is roughly $3K (1/2 point). He said in today's environment, brokers would do it for even less. I was not looking to screw the broker, but was attempting to improve my deal and provide him fair compensation for his efforts.
I never insinuated that all brokers are rapng their clients, only that many of them do not disclose to their clients how YSP works and how they can use it to benefit their situation. My broker was silent regarding this issue which meant that he intended to take 100% of the YSP without as much as a discussion. There would have been no negotiation if I hadn't learned of the system while going through this process.
Coincidentally, after the deal was finalized, I went back to my friend who made the referral and asked him about YSP. He said he had never heard of it and then went on to say that he worked with this broker on three separate occassions in the past. I guess the broker never disclosed this to him either.
Additionally, I asked folks around my office if they knew how YSP worked and no one did. That tells me that many brokers are not explaining YSP to their clients, which also means, clients haven't received the best deals that they could have.
Since it occurs to me that the system is misunderstood by many, if not most, I believe it would be better to do away with YSP altogether and disclose the broker fee on line 802 of the GFE.
As for your example of the first time homebuyer without enough funds... I agree the YSP system can help him.
That said, my only problem is with the nondisclosure of YSP in terms that the average person can understand. If a prospect understands the fee and accepts the terms, there is no problem. However, it's an entirely different matter when the prospect has no clue.
Little Fish
Beach Lover
Bob:
I received a good deal and improved my understanding of the industry which will pay dividends over time. Hopefully others on this board have benefited as well.
If you've read my latest response to Mango, I believe you will feel differently about your concluding comments.
Little Fish
I received a good deal and improved my understanding of the industry which will pay dividends over time. Hopefully others on this board have benefited as well.
If you've read my latest response to Mango, I believe you will feel differently about your concluding comments.
Little Fish
Beach Lover
Diane:
I just want to take the time to Thank You for all of your invaluable contributions to this board.
Little Fish
I just want to take the time to Thank You for all of your invaluable contributions to this board.
Little Fish
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