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How do I indentify which ones are the 'junk fees'? And what's the best way to shop for national lenders? I would imagine, the Internet. Does anyone have a good website to recommend?
Here's BofA's site to get an approximate rate and list of fees. If you enter the info then click through closing cost examples, where they will list all the fee items. These are for reference since obviously it depends on credit score and other issues.
The best way to shop national lenders - keep it apples to apples....shop the 800 numbers against the 800 numbers, the mortgage branches against the mortgage branches......the dirty little secrets they won't tell you.....when working the internet/800 numbers will get you a better rate than the local mortgage office or bank branch, you will have CSR assigned to you (that gets credit for the sale). Once they can ID it was you that has inquired (phone number you provided) the incoming sales calls will be relentless. Once your loan is "booked" (rate and program locked) and you have been given an approval (from DU) your loan is passed along to the Fulfillment Department (Processing Dept). Up until your loan is turned into Fullfilment, you will work with the one telephone sales rep you have been on the phone with. If your CSR is not available, notes are in the computer and really anyone can assist you. What you tell one person may not make it to the rest of the "team." Hopefully, you won't need anything outside of routine mortgage lending (such as, assistance on purchasing a foreclosure, renegotiating rate/lock, underwriting exceptions). This is not a full service mortgage loan department. You can also complain until you are blue in the face and no one in California is going to care that your deal in Georgia is heading south.
If you have a purchase transaction with a contract deadline, especially if there is a deposit at risk, you may be better off w/ the local mortgage branch loan officer. Your rate will be higher than the 800 line and they will not match a quote from their own company.....they are not even suppose to compete with it. You are paying fo the hands on, getting your contract to the settlement table on time. The branch level cares the most about any realtor related complaints, knowing that is their lifeblood in the community. Even then, processing time is taking weeks. Do not expect to be getting anything done in under 21 days.
Banking center branches, as in the ones that also handle your checking.....stay away. The bank branches may only do one loan every 3 months and don't have a clue about what is involved in a purchase transaction. These employees are not trained for mortgages and should not be practicing on anyone's loans. I would even take this one step over to ANY BANK that has the employees preparing deposits and then process a mortgage? Keep your mortgage out of the bank branch. (Exception: credit union).
I recently worked for one of the top 3 and have friends at the other two. All three are designed the same. They are all three the epitome of the black hole, before the loan, during the loan and after the loan closing.
I still recommend local regional banks for not only rates, but service. It's the reason I left. You can have the best rates in the world, but they are worthless if you can't get it to closing on time.
What ever happened to asking people you know and trust for referrals to 2-3 people? Then shop them?? Maybe I am old fashioned, but I think the FIRST step to negotiating a good deal is to find someone with experience, knowledge and integrity.
People can tell you what you want to hear all day long, a "good faith estimate" is exactly what its called. Its only as good as the faith you can put in the person. They are estimates and can be made to say anything by anyone to win your business. I see many people that get a GFE that is completely incorrect (fees on wrong lines, pre-paid finance charges marked incorrectly, 3rd party fees reduced to seem competitive) and bait borrowers in. Or they provide a GFE based on assumptions without checking to see if they are based on fact.
The honest answer is until a lender has a complete file in front of them they can not guarantee anything. Until that point, the person doing it is either trying to sell you on doing an application or offering honest advice. When calling someone at random off the web or a commercial, which do you think you are more likely to get?
I haven't heard anyone else mention this, but ask the lender what the APR is on the loan. That is all of the "fees" rolled in to the interest rate and helps you compare apples to apples. With that being said, I AM NOT in the mortgage industry, but it is what I use personally that helps me.
I already know someone on city-data that lost out on a great rate, but was still looking for better. While looking to save the $610 lender junk fees, an 1/8% in rate was lost, a far more expensive trade off. Great online advice given from someone not even remotely in the business. I'm in the business and very cautious about what I say in a public forum. My counterparts in other locations of our country are also subdued when it comes to advice. I would love to know what some of the more vocal advisors do for a living, because they are going to cost some that listen a lot of money.
I only know to say this one way, now, bluntly. I have tried to say it softer, but it’s missing the mark. Many (of the millions) of lenders/brokers/bankers love it when the shoppers come to them with the fee or rate bull’s eye on their forehead. But know one thing, if you are not prepared to lock in, right then and there while talking to that lender/broker/banker, probabilities are high you are being told nothing more than what you want to hear. If you are lucky enough the GSEs are moving in your favor, they may actually honor the offer they made today, at a later date. If the market moves away from your favor, “rates changed,†the most acceptable excuse out there.
What many here on the forum are not saying is this: there are two approaches to our business, tell it the way it is, or, tell you what you want to hear. Both have the same prices (rates) to meet. Most of us prefer to share with customers the challenges and variables we face up front, while others prefer the rose garden with the last minute surprise. But at this particular time in our business, where the loans are fragile at best and certainly not easy to come by, everyone I am aware of out there, banks, correspondents and brokers are all pricing by very slim profit margins. And where many of us are delivering to the same investor, there is really only one variable and that one is controlled by the customer, when to lock in (yet everyone wants to hold us responsible for that decision).
It’s never simple, as many will want you to believe. There will always be a trade off, somewhere for something in the overall pricing of a loan. Even those of us in the business pay junk fees…our employment benefit typically is the company’s mark up being waived. It’s up to us if we waive our own pay on our own deal. Sure, you can ask and they can always say no, and you move on until you hear what you want to hear. There’s a huge difference in looking for a fair deal and looking for something for nothing. And when the target (the rate) and the supporting data (value and guidelines) are constantly moving, who is to say who got a fair deal?
(And, all that I have said here can change with a snap, but this is the current pulse on the business).
interesting. let me ask you a question... where does the rate come from if the FED is charging you guys 0 or close to 0%? these are in no way sustainable to the FED, so who is making money here? if we pay the FED our tax money, then they in turn loan it to you for nothing, one would naturally think credit would be more liquid, and rates half of what they are now. does it really cost 4.5-5.5% of 700 billion dollars to pay you guys? i can tell you from an investor's standpoint that we are not seeing any of this money. i have seen depreciation for the first time since i started investing, and while it doesn't bother me, i can see how it can devastates others. so who, and what exactly sets the rate? i will accept nutshell answers since it will probably take you the better part of this thread to reply.
interesting. let me ask you a question... where does the rate come from if the FED is charging you guys 0 or close to 0%? these are in no way sustainable to the FED, so who is making money here? if we pay the FED our tax money, then they in turn loan it to you for nothing, one would naturally think credit would be more liquid, and rates half of what they are now. does it really cost 4.5-5.5% of 700 billion dollars to pay you guys? i can tell you from an investor's standpoint that we are not seeing any of this money. i have seen depreciation for the first time since i started investing, and while it doesn't bother me, i can see how it can devastates others. so who, and what exactly sets the rate? i will accept nutshell answers since it will probably take you the better part of this thread to reply.
Well, first of all the FED doesn't have a "rate". They have a "target range" that they can use various measures to try and get to. Right now their target is 0-.25%. The problem is that money has a "cost" at every step, to cover overhead, expenses, risks and generate profit. The banks have to pay for those fancy buildings, staff, computers, etc and cover losses from defaults while still making a profit.
Also, mortgage interest rates are NOT and have NEVER been directly influenced by the FED rate or US Treasury bonds. People always go crazy and call when they see that the FED lowered their funds rate or that US Treasuries are down.... many loan officers get worked up too, because they don't understand how mortgage rates are set.
Mortgage rates are determined by the sale of mortgage backed securities. If you take a look, they are trading at a much higher rate than US Treasury bonds. The spread is actually at a pretty high level now, which is why although the FED funds rates and US Treasury bonds have gone down, mortgage rates have not decreased as much (although they have come down a bit).
The sale of mortgage backed securities and demand for those products by investors sets the interest rates offered on mortgages. That is why the initial bailout plan called for the purchase of troubled assets, to get rid of the bad debts so that investors would go out and use their money to buy the new, "safer" debt. There have also been plans floated for the governent to directly buy MBS and thereby lower the interest rates on mortgages.
In reality, mortgage rates go up just as often as down after the FED cuts their short term rates. This is because when you cut short term rates, you raise the risk of inflation. That is bad for long term rates, like 15 and 30 year fixed rate mortgages as the $1 lent today will be worth less then. To compensate, interest rates on long term debt generally (not always) moves up.
One of the biggest mistakes during the boom was inadequate pricing of risk. Lenders took too many risks (high LTV, low credit, reduced documentation) and also did not price for it. As much as people complain about 7-10% interest rates, it was insane for lenders to offer such a LOW rate for such HIGH risk loans. Hard money lenders have been doing no doc loans for years. They ignore credit and income, but they ask for 25-50% down, charge a few points upfront, and the rates are in the double digits. What made banks think they could offer the same programs at 100% financing and single digit rates without problem?
Last edited by rcarrillo; 12-31-2008 at 10:27 AM..
I think racarrillo's question was rhetorical, and I also think they know the answer. It is nevertheless worth explaining WHY lenders thought they could get away with offering easy terms and cheap rates on mortgages that saner minds had decided required a much larger risk premiums.
The answer can be simple -- they screwed up. The details though make is less of a "HOW COULD THEY HAVE BEEN SO STUPID." The first detail is that lenders are ALWAYS seeking ways to entice investors into new methods of putting up money for the the promise good returns and low risk. The theory of a bundle of mortages being less risky than any individual mortgage is sound. The idea that riskier mortgages could be made less risky by purchasing insurance is similarly, on its face, sound. Thus the ideas behind MBS are not fundamentally unsustainable.
When you dig a little deeper things get murkier. When one needs to determine the "risk" a certain investment has it is customary to consult a rating agency. Those agencies tend to look at historical data and find a similar kind of situation so they can do some comparative analysis / modeling and assign an understand rating to the investment. Historical data said that people with certain kinds of credit history and certain size mortgages defaulted at a certain known rate. Only problem was that those numbers were rapidly changing. The kind of buyers that high volume lenders were rapidly setting up in houses were further and further away from the historical norms. First red flag.
If you look at what sorts of insurance the mortage bundlers got to make the riskier loans have higher ratings you quickly find out that these were NOT the traditional cash generating vehicles that old line casualty companies use for straight acturial risks. Instead these were the sexier Credit Default Swaps. Now maybe Credit Default Swaps were appropriate, as the commercial lending areas have had a pretty good track record of relying on these instruments, but assumption was that the firms had enough integrity and reserves to actually make good on the relatively rare occurance of some large commercial borrower running into a bad patch. Worst case the banks would generally rather let the default leg get a do-over on taking the bad debt AND CDS than really settle the thing for cash. Well that works when you are talking about some huge individual deal with ONE underlying event (like GM defaulting on line of credit) and CDS between a couple of money center and/or investment banks. But you can't accept those kinds of terms in the underlying even is dozens/hundreds of mortgages and the counterparties are removed three levels. Red Flag Number Two!
The real sick part of this wide spread acceptance of underpriced risk was that in short order MOST borrowers AND lenders rapidly began behaving as though reduced risk premiums were a good thing. When it is too easy to do do things that ought to be prevented with higher rates people will just go ahead and do 'em with blinking an eye. Back in the olden days if you had a mortgage and you decided, "Man I am not pulling in the dough I need to make my life as CRAPTASTIC as I'd like, I wonder if the bank would give a SECOND MORTGAGE to amp up things." the curmudenly banker would look down over his half-glasses and waving his hands dismissevely would SHOE you ought of his stuffy bank, probably even lecturing you about what a ungrateful uppity whippersnapper you were. Instead the hip new lenders would GLADLY give you a second and even rename it something a helluva lot less scary. This was a new world where oppressive "may a please have some more gruel" SECOND MORTAGES become hip, friendly Home Equity Lines of Credit. Heck, since risk markets were UNHINGED those HELOCs were CHEAPER than 1st mortgages. RED FLAG NUMBER THREE.
Big picture, the world IS different. Productivity, especially in the world of finance, is sky high given the nature of electronic communication and computational power. BUt HUMAN NATURE is still driven by some base motivations and the ability to get stuff NOW NOW NOW rather patiently saving and scrapping by means that you can't "flip a switch" and turn risky behavior into virtuous. Risks and rewards are going to have to find new ways to come into balance or we are going to live in spikey roller coaster of a world...
Wow, you are right, but I am not even going to attempt to explain. Rcarrillo has far more patience than I, because I wouldn't know where to begin. The short answer is, if rates were calculated the same way they were 2 years ago, then yes, the rates offered the public would be lower. But then, as chet everett has explained, it's a different world.
This is such a complex issue, our fearless elected leaders that helped themselves to 700B of our own money can't even get the banks back out there lending the money to Main Street, USA. WHAT I AM CIRCUITOUSLY STATING, THE FEDS CAN'T GET THE BANKS TO LEND THE MONEY.......that is the problem. The banks don't care - they still fear liquidity shortages. They look at all of the paper loaned out on their books and ASSUME it's all bad paper (or soon to be bad). So, if they are going to lend money, they are going to be 1) damn sure the new paper doesn't go bad, 2) their yield is going to be most excellent, and 3) they can unload it in a fire sale.
But to answer your question, the rate is set by what the market will bear. The "feds" are trying to tempt the consumer, make it worth their while. The fly in the consumer's ointment this go 'round, the banks would rather not lend (unless very worthwhile or zero risk). And it's beginning to appear for it to be worthwhile the bank's participation, the government is going to have to take it a step further, and directly provide Mortgage Backed Securities (as opposed to Wall Street).
Quote:
Originally Posted by michael11747
interesting. let me ask you a question... where does the rate come from if the FED is charging you guys 0 or close to 0%? these are in no way sustainable to the FED, so who is making money here? if we pay the FED our tax money, then they in turn loan it to you for nothing, one would naturally think credit would be more liquid, and rates half of what they are now. does it really cost 4.5-5.5% of 700 billion dollars to pay you guys? i can tell you from an investor's standpoint that we are not seeing any of this money. i have seen depreciation for the first time since i started investing, and while it doesn't bother me, i can see how it can devastates others. so who, and what exactly sets the rate? i will accept nutshell answers since it will probably take you the better part of this thread to reply.
Wow, you are right, but I am not even going to attempt to explain. Rcarrillo has far more patience than I, because I wouldn't know where to begin. The short answer is, if rates were calculated the same way they were 2 years ago, then yes, the rates offered the public would be lower. But then, as chet everett has explained, it's a different world.
This is such a complex issue, our fearless elected leaders that helped themselves to 700B of our own money can't even get the banks back out there lending the money to Main Street, USA. WHAT I AM CIRCUITOUSLY STATING, THE FEDS CAN'T GET THE BANKS TO LEND THE MONEY.......that is the problem. The banks don't care - they still fear liquidity shortages. They look at all of the paper loaned out on their books and ASSUME it's all bad paper (or soon to be bad). So, if they are going to lend money, they are going to be 1) damn sure the new paper doesn't go bad, 2) their yield is going to be most excellent, and 3) they can unload it in a fire sale.
But to answer your question, the rate is set by what the market will bear. The "feds" are trying to tempt the consumer, make it worth their while. The fly in the consumer's ointment this go 'round, the banks would rather not lend (unless very worthwhile or zero risk). And it's beginning to appear for it to be worthwhile the bank's participation, the government is going to have to take it a step further, and directly provide Mortgage Backed Securities (as opposed to Wall Street).
what kills me is that these loans aren't sustainable, and the tax payers will cover the cost of offering these loans, which i am guessing will be in the hundreds of millions.
what kills me is that these loans aren't sustainable, and the tax payers will cover the cost of offering these loans, which i am guessing will be in the hundreds of millions.
Yep... except hundreds of millions might be too low. Might costs billions and billions
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And what's the best way to shop for national lenders? I would imagine, the Internet. Does anyone have a good website to recommend?
