NJ First-Time Home Buyers

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Rates - APR - Points - Fees - GFE's: How the Playing Field is Still "Crooked"

Rates - APR - Points - Fees: How the Playing Field is Still "Crooked"

I talked to a client today who was shopping me against some other lenders. I don't blame people, and frankly if I think someone else has a better offer and they are legit, I advise "my client" so and have no hard feelings.

Deceptive?In the scenario today, said client was offered 4.5% with no points. I told him it wasn't possible, but lest I be ignorant, I dropped by this other lender's website. Indeed, the lenders website quoted 4.5% with no points and an APR of 4.878%. The website gave the assumed loan amount and purchase price. So I went and did the math. What did I find out?  To make the rate and APR accurate, I had to add 2.25% in points ON TOP OF all of the regular fees (title, appraisal, etc.).

In other words, even though the quote was 4.5% with zero points, the TRUE cost was 4.5%, plus typical closing costs, PLUS 2.25% in additional fees/costs.

Please send me your Goofy Good Fake Faith Estimate!

There are several issues with this scenario

  1. APR is supposed to HELP consumers, not confuse them. Clearly this bank (a large bank at that) is charging hefty fees instead of points. This brings us to our next point ...
  2. Points are tax deductible costs - most other fees are not. Charging high fees in lieu of points is an injustice to the consumer. We see rates quoted with NO POINTS to make them look better to consumers. However the total cost is ultimately higher than a lender that is straight forward, charging the same dollar amount but in the form of points. A loan with the same cost in points (versus fees) is a far better deal, saving a consumer hundreds or thousands in tax deductible costs.
  3. APR is "pliable" - Certain fees are calculated into the APR calculation, others are not. Do not assume lenders don't play with the "names" of fees to artificially lower their APR's. That doesn't seem to be the case in the above example, nonetheless keep this in mind.
  4. Lastly, said bank WOULD NOT give the buyer a good faith estimate without having him apply for a mortgage. OK, not so crazy, but the good faith estimate would not be given for 3 days. And if the bank charged an application fee? That would just be another deceptive way to lure a consumer in and tie them to the bank.

The Truth about APRAny lender should be able to offer you a good faith estimate (GFE) in a fairly short amount of time, 24 hours or less, allowing some time for when a lender is very busy. Assuming the lender is honest and accurate with their fees, you should be able to see the true cost of their offered rate. You should be able to see, as in the above scenario, that their rate of 4.5% with no points really has a lender fee of $4,119 (Actual additional cost based on their APR). This same week I had another rate shopper send me a goof good faith estimate with 1% in points and $2,100 in application fees. THIS IS NOT NORMAL or fair to you as a consumer, especially on a purchase loan.

I am not angry for losing business. I am however angry because of the lenders and loan officers that mislead and decieve consumers who are just looking out for themselves by rate shopping. What we often see, is that many consumers that search the world over for the lowest rate, actually end up paying much higher costs via deceptive lenders. Consumers can be blinded by a low rate, not allowing them to see the true cost.

 


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Steve Kappre is a Mortgage Planner with Treasury Mortgage. Steve specializes in;

• All areas concerning NJ First-Time Home Buyer Mortgages, grants, down payment assistance, tax credits, and more.

Reverse Mortgages

• Equity Management strategies for high-end homes and high net worth individuals.

Contact Steve Kappre directly at 856-419-3561 or at www.stevekappre.com

Comment balloon 59 commentsStephen Kappre • October 02 2009 10:18PM

Comments

Thanks Steve.  I love the GOOF Faith Estimate, because the unscrupulous mortgage brokers will bait and switch.  I'm working with one GOOF BALL lender now.  He's a real scank and I can't convince my clients to see someone else.  Oh well . . . won't they be surprised at the closing table.  I told you so . . . CAN'T WAIT TO SAY IT!!

Posted by Carla Muss-Jacobs, RETIRED (RETIRED / State License is Inactive) over 8 years ago

It's all about "Buzz Words". 

I've been cautioning home buyers about these ads for many years. 

The consumer often merely compares the interest rate.  However, since so many lenders advertise "No Points", even when the consumer doesn't understand what a "point" is, they know it's not something they think they want. 

This is one reason I shop rates for my buyer-clients.  I know the difference in a point and a junk fee.  Consumers do not. 

Good post.

Posted by Lenn Harley, Real Estate Broker - Virginia & Maryland (Lenn Harley, Homefinders.com, MD & VA Homes and Real Estate) over 8 years ago

I know just what you mean. I had the same situation with an unscsupulous banker here who would target seniors with this type of GFE.

They would show no points, charge the par rate, HOWEVER, they would pile on the other fees to make up for it.

A $1500-$2000 processing fee, $300 to record, a $700 App fee. etc... the customer saw the low rate with no points, and was blinded by this fact even though in some circumstances they even knew they were being "screwed", they just wanted the low rate.

Turned out this lender owned the title company as well !

Posted by Mike Wald (Mike Wald, Scottsdale, AZ, mortgage consultant, 480-241-2632) over 8 years ago

Great Post Steve.  I just saw something very similar to this the other day.  A friend of mine and I went to grab lunch.  On the way he needed to stop by a bank and cash a check.  While I was waiting for this bank to try and sell him every service they had before they would cash the check, I was looking at their "Mortgage Rates" It had something very similar.  No Point Loan-in the very fine print at the bottom it says "a loan origination fee will be assessed for each loan, plus additional fees may apply $200k loan with 20% down" I then had one of there very eager mortgage consultants walk up to me " you look like you have some questions about a loan, what can I help you with?" I replied "so just to make sure I understand this, you charge no points on this loan?" She replied "yes" and then I pointed out the disclaimer; she responded "correct you aren't paying points to get that rate, but there will be a loan fee" so I asked "on a $200k loan how much would the fee be?"  She quickly responded, "well if you would like to apply, I can put it in the computer and we can provide you a good faith" I asked her to just ball park it, $2k, 3k, and when I said $4k, it looked like she wanted to say yes, but came back with the same response, "if you'd like to apply..." So if that was the case- $4k on $200k-sounds to me like 2pts. 

 

Posted by John Cassels, NMLS #197076 (Sterling Savings Bank) over 8 years ago

the changes in disclosures, which will become effective jan 1, will make this worse. i work for a licensed lender who can also broker loans. i compared rates aginst myself based on the new disclosures. you wouldn't believe the results.

anyone who thinks that these changes will be in the customers bests interests is a bit looney. 

Posted by Jay Beckingham, "I love first time homebuyers" (Fairway Independent Mortgage Company) over 8 years ago

And don't forget the good ol YSP (yield spread premium). Yet another way to play hide the weenie.

Posted by Jim Lee, Portsmouth NH Realtor, Portsmouth, NH (RE/MAX Shoreline) over 8 years ago

Great blog Steve...I see Goofy Fake Estimates all the time...buyers have no idea what they are getting most days. It's down right creepy.

Posted by Melissa Breeland (Residential Mortgage of SC) over 8 years ago

Carla - Reminds me of the "Family member" that crushes in fees - We see i all too often, and the Realtors see it even more.

Lenn - WHEN we can educate a client, that is, when they care enough to listen to the pro, it always turns out right. I read before that you shop for your consumers, and although that is not normal, I'd have to say that your clients may not have the cheapest lender by the nickel, by they should always end up with a good/fair deal, and that is all anyone should ask for.

Mike - Seniors - OF ALL PEOPLE. I can't publicly say what I'd like to do to such LO's . ..  haha

John - Great story - and confirmation of the fact that some lenders choose to even train their employees this way. Wow

Jay - That's our big government at work against for the consumer.

Jim - I never had an issue with most loans regarding YSP, because if the deal is still comparable, who cares what it is. Nonetheless, I've seen some YSP approaching and over $20,000 - WITH points on top. Some loan officers make 75% of their annual commission on one customer ...

Posted by Stephen Kappre, Helping You Home (KW Hometown) over 8 years ago

Melissa - I know Realtors don't want to dig too deep into personal finances, but a look at a client's GFE should be protocol. 

Posted by Stephen Kappre, Helping You Home (KW Hometown) over 8 years ago

Hi steve here i want share similar story i lose client in same situation another lender offer them better rate then me by charging less Point but other cost are very high And client only want to compare the Points.They charge them high processing fee and application fee which i am not charging.

Posted by Sukhdev Farmah (Prime Financing) over 8 years ago

Awesome post Steve! So well said it's gonna require a reblog. Remember MDIA is supposed to prohibit those application fees we "used" to see before the good faith estimate is given, but you are SOOOOOO right as to how those numbers can be manipulated. Looking forward to "busting" some of these bad GFE's in the months ahead!

Gerry Suarez, Jr.

Your FHA Loan Pro!

Posted by Gerry Suarez Jr., Expert Home Loan Advisor (Mortgage Financial Group, Inc.) over 8 years ago

Great post.  Financing is probably the most difficult aspect for home buyers to understand.  Sometimes they never really do even after the fact.  You've pointed out some really important things here especially in regards to points and fees.

Posted by Marian Pierre-Louis, Metrowest Boston (Fieldstone Historic Research) over 8 years ago

Thank you for writing this - I have difficulty explaining some financing details to my clients and one thing I tell them to beware is application fees. Now, I can bookmark this and whip it out when I need it!

Posted by Joetta Fort, Independent Broker, Homes Denver to Boulder (The DiGiorgio Group) over 8 years ago

Steve - Wow !  I can see why this post was featured as it is must read for every Realtor and home buyer out there !!!!!!  Great job explaining how this happens.  Sometimes we get confused when consumers quote these "great deals" when our mortgage folks say that that is not possible.  At least this is one great explanation !

Posted by Christopher and Stephanie Somers - Realtors - Philadelphia Real Estate (Realtor / Owner - RE/MAX Access) over 8 years ago

Steve - Can it be disclosed what bank had this advertisement ?  : )

Posted by Christopher and Stephanie Somers - Realtors - Philadelphia Real Estate (Realtor / Owner - RE/MAX Access) over 8 years ago

Once again transparency in the mortgage industry is long overdue. Consumers will continue to be manipulated based on interest rates. If we don't do something about Washington is trying to get in the middle of it which means increased regulation which then translates into increased costs. As always that gets passed onto the borrower.

Posted by Mark Warner (RealEspace) over 8 years ago

Steve,

  Very nice blog!  I am going to hold on to this to show buyers early in the relationship.  Showing this blog along with some GFEs that actually are "good" will be very helpful to them.  I already show them some good GFE/HUD-1 examples, and your blog will be a nice addition to that set.

Thanks!

Posted by Tim D. Wilson - The Horseman's Agent ™ (HomeSalesLexington.com @ Rector-Hayden: Lexington, Kentucky) over 8 years ago

Hi Steve, yes, I suppose this is why the mortgage industry is in a "tailspin".. Very sad because you are absolutely right. The average person has no clue what they are in for.

BTW.. handsome young man there, with the sunglasses :).. chip off the old block!

Posted by Ginger Moore (Wilkinson & Associates Realty) over 8 years ago

Hi Steve -- This stuff makes my brain hurt as a REALTOR so I can only imagine what consumers must feel when many don't have the time, nor inclination to really try and compare apples to apples due to the grayness involved in GFEs.  I applaud you in your effort to try and level the playing field.

Posted by Chris Olsen, Broker Owner Cleveland Ohio Real Estate (Olsen Ziegler Realty) over 8 years ago

Steve... excellent post that I have written about 3 times in the last 2 years.  APR is a joke and can be abused and misleading. You did a great job of explaining that.  And number 3 is a big pet peeve of mine, because this is where the APR can be very shady and misleading.  Besides, the APR also calculates the interest for 30 years, when many don't keep that loan for more than 5 to 8 years. Again, excellent post.

jeff belonger

Posted by Jeff Belonger, The FHA Expert - FHA Loans - FHA mortgages - USDA loans - VA Loans ( Social Media - Infinity Home Mortgage Company, Inc) over 8 years ago

Hi Steve: I have seen some slimy brokers doing this.  They say it is no points then they charge a "internet referral fee" or a "broker fee" or some other nonsense fee that is nothing more than points under a different name which are therefore not tax deductable.  This is despicable behavior but the consumer falls for it!

:)

Posted by Matt Listro, Your Credit Repair Expert (National Credit Fixers - Matt Listro) over 8 years ago

this stuff will always go on maybe not as much as before but still and that is deceptive and misleading advertisements you know a tip to the DRE might help ;-).

Back in the hey day this was a constant pain for me.  Not as much anymore now I am just happy if they qualify period.

Posted by Gene perez (Greater Mortgage Solutions & Valley Hills Realty ) over 8 years ago

Steve  There will always be ads, lenders, realtors that play a game - I shop for my clients and give them reputable lenders to shop  by themselves Karen

Posted by Karen Kruschka, - "My Experience Isn't Expensive - It's PRICELESS" (RE/MAX Executives) over 8 years ago

Steve: Thank you.  It's always unfortunate when the customer gets bamboozled. Lately, I've lost and regained clients because of this approach. One was a client who went with a big bank because of lower closing costs only to find out they had a 1% Fannie Mae fee. They felt mislead and quickly called me. I think those of us who run our business honestly get the majority of the deals out there. For those consumers who choose someone else, I often feel sorry for them. The horror stories abound. Thanks again for the post!

Posted by Paul McFadden, Pest Control, Seattle, WA. (Paratex) over 8 years ago

Sukhdev - The consumer is bombarded with a hate for points, when what they need is an education on points/fees.

Gerry - A reblog is a fine statement of approval - thank you :) I too love to reveal to consumers what is going on, and blogging about it can hopefully reveal to MANY more consumers all at once.

Marian - Great comment, even after an explanation some consumers will still be confused, and sadly sometimes taken advantage of. Maybe there should be a fine for sleazy practices, haha!

Joetta - Glad to be of help. Although I don't charge an application fee, some charge it instead of an appraisal fee. Personally I have no issue with this, and tying some money to the transaction I don't frown upon. However, excessive application fees, or any fees, in place of points is criiminal I think.

Chris/Steph - Thanks for the kind words. It means alot coming from you guys ;) I'd rather not expose the lender, since I'm not out to make enemies, just to educate and let the consumer be aware. That way the (God forbid) they run into more than one lender practicing this way, they will understand to stear clear. However, if you need me to look over something for a buyer of yours, just let me know. I'll give me .02.

Posted by Stephen Kappre, Helping You Home (KW Hometown) over 8 years ago

Mark - Very well said. I wish I had a real cure, other than just dreaming of a day when all professionals are ... well professional about their behavior.

Tim - Awesome to hear. As a Realtor your clients will possibly listen to you even more than they would a lender, since you are truly giving outside advice that you would have no benefit in misleading with. Great idea to help your clients this way.

Ginger - That boy got his good looks from his mommy - I'll share my childhood pics someday soon, haha.

Chris - Thanks buddy.

Posted by Stephen Kappre, Helping You Home (KW Hometown) over 8 years ago

Steve.  On the contrary.  When I shop loans for buyers, we're comparing apples to apples.  The loan officers know me and don't play any games.  It's "tell me what you can do now because we're not coming back".  Further, they know that my buyers are qualified and serious buyers. 

Service and reliability are critical components which is something the consumers shopping the Internet can never know.

 

Posted by Lenn Harley, Real Estate Broker - Virginia & Maryland (Lenn Harley, Homefinders.com, MD & VA Homes and Real Estate) over 8 years ago

Steve, great blog post!  I've seen the same things in my market, and, oddly enough, it's coming more from the large mortgage bankers and local depository institutions more now than from mortgage brokers.  I've seen more disclosure problems, appraisal misconduct and RESPA violations coming from these "reputable" institutions more now than ever.  What's that all about?  I would hate to be an uninformed consumer right now!

Posted by Brett Pehrson (Advanced Funding Home Mortgage, NMLS#13287) over 8 years ago

Hey Steve, great analysis and post !  If you consider that calling " points " by any other name harms the consumer why wouldn't a borrower bring a legal action on those grounds ?    Can you imagine the defense position on this ?

Posted by Bill Gillhespy, Fort Myers Beach Realtor, Fort Myers Beach Agent - Homes & Condos (16 Sunview Blvd) over 8 years ago

Excellent points, as an agent I constantly deal with debunking these fake deals with my clients.  Never trust the advertised rates, only a GFE provided after a pre-approval process!

Posted by Jason Burkholder, Sales Manager, Assoc. Broker, Realtor, e-Pro (Weichert, Realtors - Engle and Hambright) over 8 years ago

Under the new rules - I forget when this one takes effect - lenders will not be allowed to charge anything more than the credit report fee until after the consumer has had time to read and digest the good faith estimate. No more getting them "locked in" with an application fee before they find out they're looking at a bad deal.

I usually don't agree with more regulations, but I think this one will protect people and allow them to actually shop for their loans.

The next step, of course, is teaching them how to read and understand the GFE.

Banks have gotten completely out of hand - seems that some will resort to any kind of trickery and deceit in order to make an extra buck. And there will always be mortgage brokers willing to help them do so, as long as it means an extra buck in their own pocket.

Good for you for taking care of your customers!

Marte

Posted by Marte Cliff, your real estate writer (Marte Cliff Copywriting) over 8 years ago

I am not angry for losing business, because I didn't lose business. I am however angry because of the lenders and loan officers that mislead and decieve consumers who are just looking out for themselves by rate shopping. What we often see, is that many consumers that search the world over for the lowest rate, actually end up paying much higher costs via deceptive lenders.

Steve, are you kidding us? What have you done to stop this practice other than your post. That's what's wrong with our industry. We allow lenders and LO to ruin our indusrty's credibility. I don't know the facts, but shouldn't you help the consumers by reporting this activity to the proper authorities?

I'm angry that these marketing ads exists because it is designed to get their phones to ring. When your prospect sees this type of ad after you've provided a GFE with a higher rate, your proposal is challenged and now the consumer is skeptical about you, isn't that true?

Fortunately in this case you were able to close your transaction. However, if every respectable Realtor of LO reported these activities, we would clean up our industry, so only the ethical and professionals remainin our industry.

Until we take personal responsibility and report these activities, we are just as guilty for allowing these crimes against consumers. I challenge everybody to report these activities to their state Attorney General's Office.

Posted by Kimo Jarrett over 8 years ago

Great post Steve. I do suggest to my buyers to compare APRs when shopping for loans, but as you and others have pointed out, there are still ways for lenders to hide fees. I was hoping the Jan. 1st rules would help the situation.

Posted by Barbara Jenness, St. Augustine FL Real Estate (Barbara B. Jenness, P.A. - St. Augustine, FL) over 8 years ago

As a mortgage banker and broker, I heartily agree that the loan officer should go line by line with the borrower through the good faith estimate so that it is understood and all fees are explained.  Some loan officers are either too ashamed or too afraid to explain that part of the closing costs will be a broker fee.  Just like the realtor I work hard for the work I do and will explain that the broker fee is my pay.

There have been some comments discussing yield spread premium (YSP).  Some people, including loan officers, look it as a secret way to make more money on a mortgage without the borrower knowing it.  I cannot emphasize how wrong this is.  Unfortunately, because of this attitude the Fed may eliminate the yield  spread premium.  I believe this is anti-consumer.  Why?  I often use the yield spread to pay for the closing costs, including the my broker fee.  For example, if a I charging one point as a broker fee, that is a closing cost the borrower must pay.  However, if I raise the interest rate so that I will get a point of YSP, guess what, I do not charge my broker fee. YSP give the borrower options on how to deal with closing costs.  If everything is explained, YSP is a great tool for the consumer.

Paul Warkow

Posted by Paul Warkow (Paul Warkow-D.G. Weber Law Associates) over 8 years ago

Someone mentioned YSP.  IF the consumer can understand this, more power to them.  IF they can't, they BETTER listen to a Realtor(r) about who to go with for their loans!!  We DO THIS ALL THE TIME "this" : have buyers who borrow money.

http://en.wikipedia.org/wiki/Yield_spread_premium

Posted by Carla Muss-Jacobs, RETIRED (RETIRED / State License is Inactive) over 8 years ago

Great post and congrats on featured! Buyers are so unaware of the unfair lending marketing out there. thanks for pointing this out and I reblogged it!

Posted by Sandy McAlpine, Search Lake Norman Homes For Sale - Lake Norman NC (RE/MAX EXECUTIVE) over 8 years ago

If it sounds too good to be true it usual is.  Home buyers are the same way on good deals with a house.  They don't understand something is either wrong with the house or they are just not going to get it as cheap as advertised.

Posted by Gene Riemenschneider, Turning Houses into Homes (Home Point Real Estate) over 8 years ago

Steve - Phenomenal post here!  This should be a required read for all rate-shoppers, Realtors, & Loan Officers.  I'll let you respond to Kimo and deal with the Attorney General's Office:)  Until then, I believe this post can do a world of wonders for anybody shopping for a mortgage.

Posted by Jason Sardi, Your Agent for Life (Auto & Home & Life Insurance throughout North Carolina) over 8 years ago

Good post, Steve. It's a shame that so many lender / brokers continue to play these games. And when the government falls hard on us with even more restrictive regulations, I bet they are the first to cry "foul!"

Marte - Under the new mortgage disclosure rules that went into effect on July 30th, lenders can charge only a credit report fee upfront. The appraisal fee or any other fee can not be collected until 3 business days after the disclosures (including the good faith estimate and Truth in Lending forms) have been mailed to the customer. This law was passed in part to put an end to the practice of hding or not properly disclosing the fees upfront or hiding excessive "junk fees" on a "0 point" loan.

Then - if the fees change and the APR increases by more than 1/8th of a percent, new disclosures must be mailed to the consumer - and there is a 7-day business wait (effectively 10 or 11 days) before they can close on their new loan.

There's more hard hitting regulations coming - and they will keep coming until these weasels stop paying their games. But by then, the only ones who will be offering mortgage loans will be the federal and state governments.

Posted by Lew Corcoran, ASP®, Home Stager & Real Estate Photographer (Scena Home Staging & Decora Photography) over 8 years ago

Excellent post. Very informative and I couldn't agree more. I once had a client whose own brother was a mortgage officer and did something very similar, I couldn't talk any since into him. On top of that, it was the closest I've come to having a deal fall through due to financing. It cost my client an extra 2k and two weeks of heartache (brother was a rookie trying to do a usda loan on a newly built foreclosure). 

Posted by Jami Van Den Bogaert (RE/MAX House of Brokers) over 8 years ago

Wouldn't it be nice if people were just honest. I think everybody agrees that you need to be paid for providing a service, why isn't that enough?

Posted by France and Mark Clausen (Realty Austin) over 8 years ago

Kimo - I would love to read a blog post of yours regarding how we should "out" these bad players. I'll link to your blog here. Thanks. :)

Visit Kimo's Blog Here

Posted by Stephen Kappre, Helping You Home (KW Hometown) over 8 years ago

@ Paul - "Unfortunately, because of this attitude the Fed may eliminate the yield  spread premium."  I don't know about that, but I'm pretty sure on what I've heard that it (YSP) will be called a different name.  And who it goes to (in payment) is up in the air as well.

And at the risk of being an ass, Kimo's Blog Rocks!!!

 

Posted by Jason Sardi, Your Agent for Life (Auto & Home & Life Insurance throughout North Carolina) over 8 years ago

I really hate it when you can't educate customers to see the difference.

Posted by Mike Henderson, HUD Home Hub - 303-949-5848 (Your complete source for buying HUD homes) over 8 years ago

How would the bank who was charging those fees get away with them not showing up on the TIL?

 

 

 

 

Posted by Janet Guilbault, San Francisco Bay Area Direct Mortgage Lender ( Guild Mortgage) over 8 years ago

Steve -- Good points. I think too  many people shop RATE only, and don't think to ask about fees.

Posted by Erica Ramus, MRE, Schuylkill County PA Real Estate (Erica Ramus - Ramus Realty Group - Pottsville, PA ) over 8 years ago

I really enjoyed reading this post - it explained a lot about APR and how to keep closing costs in mind.  All good points, down to the tax benefits!  Congrats on the feature!

Posted by Emily Lowe, Nashville TN Realtor (The Lipman Group | Sotheby's International Realty) over 8 years ago

Steve. This is EXACTLY why I never got into loans. The main way of making decent money is to play with the fees and/or the numbers. In RE, the commission is set and there are never any games. Thanks for the info.

Posted by Mark Velasco, Listing Agent-Whittier & Surrounding ciities (Sharpstone Realty, Inc) over 8 years ago

Jeff - Even after explained to a consumer, they still don't understand it 100% - heck most loan officers don't.

Matt - So much for cleaning up the industry with all these relulations huh? I think no matter how much we are regulated, there will still be that portion of business people that "slime" their way in and around.

GMS - Funny comment. I'm actually dealing with it more now, maybe because business is slower I have had more time to research the crazy claims and quotes people are getting.

Karen - I think that is all someone can ask for, a few lenders that are totally upfront and honest. It is sad that a consumer has a hard time finding someone 100% straight-forward.

Paul - Wow, a 1% Fannie Mae fee huh? I suppose that does sound more realistic and less painfull than "application fee" - nonetheless still deceptive and not in a client's best interest.

Posted by Stephen Kappre, Helping You Home (KW Hometown) over 8 years ago

Lenn - Makes sense. I guess my gut feeling when I heard that you shop mortgages for your buyers is that you would nickle and dime a lender. I doubt that is the case, and I also am sure at this point the lenders you shop with are qualified and don't have issues writing and closing loans, so you probably have a pretty straightforward system for your clients, which makes the entire process exponentially easier. You are taking one of the major hurdles of buying a home out of the equation.

Brett - One of the best comments ... THE LARGE BANKS have their hand in these deceptive practices, not the "terrible" brokers everyone wants to blame for things.

Bill - I'm not sure there is legal action possible on such a situation - and this response will be for Kimo too. Just because a lender is deceptive in their quotes, doesn't mean they are lawfully wrong. Their APR calculations may be accurate, (albeit deceptive) BUT the equation for calculating APR I believe is faulty. For instance, points can buy down the rate and make a loan a far better financial picture for a borrower, BUT the spread between the note rate and the APR will go up. This is confusing to a borrower, and they are led to believe points in this case would be a bad decisions. One reason points get a bad name because people hear the stories about going to settlement and seeing additional POINTS on the settlement sheet. The horror story then revolves around points. Sorry to get off on a tangent ...

Posted by Stephen Kappre, Helping You Home (KW Hometown) over 8 years ago

Jason - You make it sound so easy, and it usually is, especially if their agent, like in your case, is helping them out.

Marte - I feel as you, government regulation is often bad, and in the case you explain, it is a double-edged sword ... it cuts some of the deception out, but also cuts into the consumer by way of higher costs due to longer lock periods, HVCC appraisal issues, etc.

Kimo - I commented above regarding your comments.

Cheryl - You are right, if more people would (or could) walk away from the table, I suppose a lot of the jerks of lending would change their ways or not fund any loans.

Barbara - Time will tell how this pans out ... in any case, consumers will always need trusted advisors to help them navigate.

Posted by Stephen Kappre, Helping You Home (KW Hometown) over 8 years ago

Paul W - I couldn't agree more. YSP is a dirty word to some, but in the end if the consumer compared rates and costs, and the LO gets paid YSP, does it matter? As long as the client still recieved a good, fair deal? Without YSP clients will be likely hurt more than helped. Sadly they won't know this until it is too late (again).

Carla - Again, a good agent will indeed help their client in every way, including financing assistance. Of course, the majority of Realtors are scared to death of a closing package. I marvel at the fear some agents have of mortgage paperwork.

Sandy - Thanks for the reblog. Hopefully this will help your buyers!!

Gene - Good analogy.

Jason - Thanks for the kind words. Maybe I should make this part of a buyer's info packet :)

Posted by Stephen Kappre, Helping You Home (KW Hometown) over 8 years ago

Lewis - Lets see how much these regulations really help ... I won't hold my breath.

Jami - The family member loan officer, from my experience, and no exaggeration here, is worse off than having a stranger do the loan. I've seen people had to get financial gifts to close on the loan their family member wrote, all because they were being charged through-the-nose on it.

France - I hear ya. I couldn't agree more.

Mike - It is really hard sometimes to convey the right information.

Janet - Certain fees do not calculate into a TIL. The obvious fees that calculate into the TIL are points. But when a lender "renames" a fee that should be expressed as a point(s), they can choose to not calculate the fee into the TIL/APR. A lender fee should be auto-included, but it doesn't mean it is. The subject of APR could go on forever. 

Erica - Or even Rate AND APR- which we know can still be misleading.

Emily - Thanks! I hope it helped you and will help your clients better understand.

Mark - Your statement has some truth to it. A (good, fair) lender doesn't make lots of money buy charging excess, or deceptive fees, they do it by closing a good amount of loans. Hence, if a loan officer has 2 loans closing one month, they are likely to jack up the fees to "meet their personal quota" - This is where selling real estate doesn't have that issue. You negotiate your income from day one, and then it is basically done with.

Posted by Stephen Kappre, Helping You Home (KW Hometown) over 8 years ago

Steve, Excellent article!  It's no wonder buyers are so confused when they hear talk of interest rates, points, and APR.  That can't make heads or tails out of the good faith estimate either. There are other considerations a buyer must look at besides interest rate.

Posted by Sandy Shores FL Realtor®, Melbourne Real Estate, Brevard County Real Estate, Florida's Space Coast (M & M Realty of Brevard Inc.) over 8 years ago

What an AWESOME Post !!  It seems like the honest folks sometimes fall short.The borrower goes with a less than upfront person for an 1/8 better rate and "so called" lower fees. Once they are lured in and pay for an appraisal etc, the deal changes. It happens all the time. I am a firm believer in being 100% upfront and if borrower cannot see the candor, than move on. At the end of the day, i can put my head down at night and know i did the right thing! Take Care and good luck !!

Posted by Core Mortgage Financial (Core Mortgage Financial) over 8 years ago

You convinced me. I refuse to get a loan. I will buy cash only. It is ridiculous to pay $2,000 or even $4,000 to apply to let someone lend you money.

Posted by Dan over 8 years ago

Dan - that wasn't the case above either. That $2k or $4k would be due at settlement. However the issue is that it was "hidden" from the quote. There are pro's and con's to paying cash - that is a very extensive discussion beyond the content of this post. Some people will pay only cash aways, and others will invest cash for long term benefit. To each his own.

Posted by Stephen Kappre, Helping You Home (KW Hometown) over 8 years ago

Thanks for posting this Steve!  Lots of banks just scatter rates like confetti.  They assume that the lowest rate is the best deal and have no clue what is in the clients best interest.  The lowest rate may not be what's best for a particular borrower in their situation.  Let's see what happens now with the new GFE 2010.  I'll bet they don't even use the tradeoff table on page 3.

Posted by Ed Gillespie about 8 years ago

Ed - I agree and we will see. I think many won't even be around to compete.

Posted by Stephen Kappre, Helping You Home (KW Hometown) about 8 years ago

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