Getting Things In The Mail To Refi?

Many of you are probably getting stuff in the mail making all these claims about rates and skipping payments. We continue to hear from our clients they are getting these things, and they typically talk about rates in the low 4's and getting to skip 2 payments.

Well, like you have heard before, if it sounds too good to be true then it probably is. You most certainly can get rates in the low 4's...if you are paying a fair amount in points and/or fees. And the whole skipping payments thing is just a ploy to get you to call. Any loan you do, no matter what type it is, you will "skip" at least a payment because you are paying interest at closing as part of your pre-paid fees.

Bottom line...if you care thinking about refinancing and want to see what reality is in an up front, honest, ethical way then you need to call us at 830-9685. Don't trust the letter you get in the mail, call us.

Online Lenders

We never cease to be amazed at the perception in the eyes of people that online lenders have the best rates. You need to hear us out on this...that is usually not the case. And one thing that is never, ever the case with online lenders...they cannot compete with us in how they treat clients. Why on earth would you want to work with a lender who does not know you and, really, does not care at all about you because you are a number to them. Do you honestly think they will do anything to "wow" you so that you will refer people to them? It is all about volume; they could not care less.
This is all stemming from the fact that we received a call yesterday (from a past client, no less) who was talking to an online lender. He really thought he was getting a great deal from this lender and was not even going to call us to run it through the "sniff test". Huh? We just will never understand why one would not go back to a company that operates the way we do and, at the absolutely least, have us advise him on whether it is a good idea or not. Unbelievable.
Folks, here us out on this...if you are blindly trusting what an online (or just any other) lender is telling you as fact then you are setting yourself for getting burned, or at least getting a bad deal. USE US, THAT IS WHAT WE ARE HERE FOR. We call it our three E's: Educate, Evaluate and Eliminate. If a lender is not doing the three E's (and we assure they will not) then you are at risk.

Broken Record

OK, I know we preach this all the time but...you MUST work with a lender who will educate you on your options, help you evaluate those options and help you analyze which option to choose that best fits your situation. We cannot express enough how critical this is.

We just had a person walk into our office from our sign. That never happens. Literally, that is the first time in probably 5 years someone has done that since we are 100% referral based. This sweet lady was working with B of A and wanted to shop. We ended up meeting for about an hour analyzing in detail her situation. Here are some of her quotes from this meeting: "You guys are not typical loan officers, are you?" "You really help people understand their options." "I had no idea I could do that." "So that's what that means. I never understood that." "I will make sure and send anybody I know to you guys."

We are not tooting our own horn here (well, maybe a little) but want you to understand that traditional lenders are not in the business of helping you get the best loan for your situation. Traditional lenders are order takers, you tell them what you want and they do it because speed is king. They want you in and out as quickly as possible so they can be on their way. Folks, good service is not good enough. You must expect and demand unparalleled service. Service so good that you leave the meeting as that company's advocate. This woman would have gotten into a loan that was expensive and unecessary. Instead she left knowing exactly what her options were, and will end up structuring this in a completely different manner than she even knew possible. There is not much more fulfilling than having a client leave your office having watched the light bulbs go off all over the place. What a way to start the weekend.

Good Video On Refinancing

Click on the title to link to a good video about the refinancing going on right now. We agree with them that these low rates are not at all what is going to get the housing market back on track. Refinancing is booming right now; buying homes is way down. But, as we have continued to say, now is a perfect time to be buying a house because rates are low, and so are home prices. If you were to wait too long then you may miss out on both. It is not like the housing market is pushing up right now, but it is a "perfect storm" for buying a house also.
For those refinancing, just keep in mind that now is not the cheapest time to refi. Rates are very low, the lowest we can remember. But you must pay a point to get those rates. When rates were this low a while back you did not have to pay points to get those rates. So they are low, yes. But not cheap. However, what is different about rates this time is if you do not pay a point then the rate is way higher. So when you calculate the break even point by using the payment savings vs. the loan costs it is interesting to see that it is virtually the same whether you pay the point or not since the rate goes so far up if you do not. That said, it is essential then (and makes the most sense) to pay the point because then you are also saving more money due to the interest savings. Make sense? If not, call us at 830-9685 and we will walk you through it.
Lastly, remember this, you cannot get hung up the costs associated with refinancing. What, you say? There are two major factors in refinancing, rate and payment. Sure costs are important; we are not saying to ignor that because then you are paying frivolous amounts. But you could be paying very little in costs and not seeing much of a difference in payment and rate. You have to analyze how much it will save you, of course. But probably more importantly is how long will it take you to break even on the costs of the refinance. It is critical that you understand the importance of looking at the big picture of what the refi will do for you in the long run, and do not get so hung up on the costs. If a mortgage costs you a rediculous amount, like 30K let's just say for arguement, but you are making up that cost in 12 months then who cares what it costs. Do you see? If you make up the costs in a reasonable time frame then the costs are not near as relavant because of the savings you will experience long term. There are many, many factors that go into this analysis. So if you want us to run through your scenario for you then get in touch with us.

What is the Real Cost of Financing?

Annual Percentage Rate (APR) is a tool that you can use as a starting point to compare loan programs. However, it's important to keep in mind that APR is not a perfect system, and not all lenders calculate APR in the same way. While the Federal Truth-in-Lending Act does require any mortgage broker or lender to disclose APR to the consumer, there is no rule written in stone for calculating this number that each and every lender agrees upon. Thus why shopping for loans can be so difficult and frustrating.

The point of calculating APR is to let you know what the actual cost of your financing is in the form of a yearly rate. APR factors in certain closing costs and fees associated with the loan, and spreads this total over the life of the loan along with the actual note rate. The objective is to give you a clearer picture of what your actual costs are, and this inhibits lenders from hiding fees or upfront costs behind low interest rates in their advertising.

Fees that are generally included in the APR calculation are points, pre-paid interest, loan processing fees, underwriting fees, document preparation fees, and private mortgage insurance. On occasion, lenders will include a loan application fee and/or credit life insurance. Fees that are normally not included in the APR calculation are fees from Title, Escrow, attorney, notary, document preparation, home inspection, recording, transfer taxes, credit report and appraisal.

Remember, all lenders do not perform the calculation the same way. Moreover, APR does not consider the possibility of making pre-payments, moving or refinancing. Unless the interest rate is tied to a fixed instrument, APR is even more confusing.

Calculating APRs on adjustable rate and balloon mortgages is more complex because we really have no way of knowing what future rates will be.

If all lenders calculated APR the same way, you could make easy comparisons when deciding on what loan program to go with. Since they don't, however, you should know that APR is simply a starting point for comparison. You should rely on our skills as a well-versed Mortgage Advisor to assist you in obtaining the loan that meets your specific needs. The more important things to consider are how long the loan is needed? What are your long-term goals regarding the house? If you only expect to stay in the home for five years, there's not a lot of sense in looking exclusively at 30-Year Fixed rates because the APR seems more reasonable. If, for example, a young couple is buying a home, knowing they will refinance in eight years to pay for their son's college education, then once again, APR is not a realistic factor to take into consideration.

Any loan person should be prepared to answer questions about APR once the lender provides the Truth-in-Lending Disclosure Statement (Reg Z), such as why the "amount financed" listed in Box C is not the same as the actual loan amount, and why the APR is higher than the interest rate on the loan in most cases. You will get a clear definition about the fees associated with your loan in the good-faith estimate, but the Truth-in-Lending Disclosure is often an area that is confusing to the borrower. And, unfortunately, that is how most lenders like it. So give us a call and we will walk you through it step by step.

HUD Sued By The National Association of Mortgage Brokers (NAMB)

In the last several months HUD passed some new laws regarding, specifically, a new Good Faith Estimate (GFE) that will go into effect in 2009. The intended purpose of this new GFE is to have more disclosure to the consumer so they know what they are getting and paying for. The problem...that is not the problem. The problem is that the consumer is not educated enough to know what they are looking at, and what it means.

It is sad that we have to come up with all these new rulings to "protect" the consumer. If this industry actually had some worthwhile regulations that would keep the yahoos out then that would help a ton. And it is sad that people intentionally mislead folks, or maybe at least unintentionally because they have no interest in educating the consumer.

Regardless, for those of you who know us, you know that we have no problem giving you our opinion (or the facts, as we think about them). So here you go:

Fact #1: As my dad would say, "HUD does not know it's butt from a hole in the ground." If they honestly think this will solve the major issues then they are kidding themselves (see opening paragraph). It is utterly fascinating to me that HUD would completely disregard the people who are in this industry and try to come up with their own thing.

Fact #2: Consumers do not want more forms, longer forms (the GFE is going from 1 page to 5!), disclosing more info they already think is greek and do not understand. Consumers want people who are trust worthy, will educate them on the realities they are facing in a mortgage and will walk them through the process from start to finish. They want people who will do what they actually say they will do (novel idea).

For those of you who are interested, here is the article about the suit that NAMB filed against HUD.

The National Association of Mortgage Brokers (NAMB) filed a lawsuit against the U.S. Department of Housing and Urban Development (HUD) after it issued the Real Estate Settlement Procedures Act (RESPA) Final Rule issued November 17, 2008.

NAMB, with the support of Baker & Hostetler LLP and the Federal Policy Group, argues that the Final Rule is in violation of law, finalized on a flawed consumer testing methodology and will have a detrimental impact on small businesses consequently having a negative affect on consumers.

"HUD has failed to examine properly the Final Rule's impact on small businesses," said Marc Savitt, NAMB President. "It will put small business mortgage professionals at a significant competitive disadvantage, impeding competition in the mortgage industry and ultimately hurting consumers. What we are looking for is a level playing field for consumers."

HUD was quick to react to the announcement that NAMB had filed the suit.

“In this housing market, the nation is crying out for reasonable regulation to help families shop for and save money on the largest purchase of their lives,” HUD commented. “This rule is that reasonable regulation and it helps consumers to avoid getting into trouble in the first place. It’s mystifying why anyone would stand in the way of the kind of transparency this rule brings to the marketplace.”

The lawsuit against HUD states that the Final Rule is "arbitrary and capricious," contrary to the intent of Congress, and fails to offer any rational reasons for its rejection of alternative approaches. The case alleges the Final Rule discriminates against mortgage brokers with the required broker-only disclosure of yield spread premium (YSP), placing them at a permanent disadvantage in the marketplace.

According to Savitt, the complaint includes a laundry list of the different government agencies that have had a problem with the proposed rule.

Savitt told RESPA News that HUD has disregarded numerous federal and private sector studies providing evidence that different origination channels disclosing differently confuses consumers, and will often times cause them to choose a more expensive mortgage product.

NAMB argues that consumer studies conducted by HUD failed to test both the consumer understanding of loan terms and comparative shopping when originator compensation was not disclosed, and disclosures in transactions involving competing originators.

"Flawed testing methodology prevented HUD from adequately assessing consumer understanding of provisions in the originally Proposed Rule,"
Savitt said. This led to the Final Rule being issued on flawed and inaccurate conclusions, he added.

"Reform of RESPA is necessary to accomplish a simplified mortgage process," Savitt stated, "But implementing provisions harmful to small businesses and consumers in doing so, is not the answer."

“The final rule is contrary to the intent of Congress,” Savitt told RESPA News. “HUD can’t reasonably justify this thing. Most importantly, it is not in the best interest of the public. They failed to offer any reasons for rejecting the alternatives we presented. Case in point: NAMB gave them a prototype of a one page GFE that was a mirror image of the
HUD-1 settlement statement, which makes sense.”

Savitt contends HUD had every opportunity to “get this thing right” but in the end is failing the consumer.

Rate Update and Other Info You Need to Know

Rates continue to hold steady right now. As of this post rates are in the high 4's to low 5's paying 1 point (or 1% of the loan amount). Undoubtedly, you are hearing rates ranging all the way down to the mid 4's. We are telling you now that you cannot get there without paying more than one point. If you want to really know where rates are at then call us and we will keep you in the loop.

I had a client call today telling me they found a place that was doing 5% without any points. He even had me visit their website where I could see exactly what they said. So I went ahead and called them and shopped. Here is a very popular trick lenders play...when I asked the right questions regarding their rates and fees I learned there surely was not a point. However, they had a 1% origination fee. Folks, discount points and origination fees are one in the same. It is tomato tomatoe. They are not different, except by their title. Either way you are paying 1% of the loan amount to buy that rate down. This is a pathetic effort by these lenders to mask what you are really paying. And the reason they do it is because you have been trained by this industry to ask, "Am I paying any points?" The answer in this case was, "No" because you were paying an origination fee; but they are not going to tell you about that until further down the line when you think it is too late. Just know, it is NEVER too late to back out.

Here are three major things that will affect your interest rate:
1. Credit Score.
2. Loan To Value (LTV).
3. Purpose of loan. Are you pulling cash out? If so, this will hit your rate. And keep in mind that those of you with a first and second mortgage that you want to combine, if the second was not part of the original purchase of the house then your new loan is considered a cash out refinance even though you are not getting cash back.
Your rate will be directly impacted by there three factors the most.

Also, a big guideline change we are dealing with now is that your Debt To Income (DTI) ratio cannot exceed 45%. DTI is the percentage of your income that goes to pay debt. There are compensating factors that will allow you to go over this limit, but you have to meet three of them in order to be considered. This is a fairly substantial change that is affecting some people's ability to get qualified.

Bottom line, if you or anybody you know is interested in buying a house or refinancing then have them call us first so we can walk you through the process and help you evaluate what is best, and what is the truth.

New HUD Ruling

On Wednesday, November 12, 2008, the Department of Housing and Urban Development (HUD) issued a press release announcing the finalization of its changes to the Real Estate Settlement Procedures Act (RESPA). We shall see if this new ruling actually helps or hurts the consumer market. It seems that too much of what our government imposes on us as helpful ends up doing more damage than good (see last two posts as some proof for that).
I guess what is frustrating with this is people should not be working with lenders that do not disclose info. Why do people work with these lenders? And the reason is because they trust somebody too much and by the time they realize they are about to get screwed it is too late (at least in their mind). But it is never too late to walk, folks. You are never forced to work with a particular lender. And just because you may have already started the process and would have to start again, it is worth it; if you do not walk away where is the "lesson learned" by these people.
But it is more than just blindly working with someone referred to you. Every loan we do is referred to us. But when people call us they can immediately here the difference just in what we are saying. Good lenders should stand out. Great ones immediately display a difference. We have said this a thousand times, the inward reality MUST match the outward perception. Just because someone has referred you to a lender does not make them good (the outward). What are the specific things they do that show they are the best (the inward). It is up to you to ask because most lenders would never volunterr this info to you because they cannot show anything. They are all talk.
We would love to further discuss this with you. Call us if you would like to.
In the mean time, here is the link to the new HUD ruling. Let us know if you have any questions.

The Lying Game

So yesterday we get a call from an individual who was referred by a past client. They were already working with another broker, but were encouraged to call us to double check what they were being told. This is a great borrower in every aspect.

The Lies:

• The other lenders rate quote was not that good. They said it was because their DTI was too high (lie #1) and their credit score was not high enough (lie #2). Plus, they were charging 1 point (1% of the loan amount).

The Truth:

• Your DTI does NOT have any affect at all on your interest rate.
• In this particular case, the borrowers credit score was actually helping their rate, not hurting it.

The Conclusion:

1. We were able to get her a rate that was .375% lower than the other broker, and do it with no points at all.
2. This borrower stated they thought they could trust this guy because he worked with people in their particular industry. Let us assure you of this, no matter who people work with they can still be a bunch of yahoos. Check them out! Ask for references; then call them.
3. Lenders will make up anything to get you to believe what they say. Why? Because they think you are a bunch of idiots and will not know any better. Unfortunately, it is often because you do not know where to turn to check what they are saying vs. reality.

This is why we are here...email us with any questions or scenarios you have. We will happily help educate you on your situation to ensure you are doing something that will actually be good for you, and not just screw you. As a referral based company, actually doing your loan is way down the line. If we take care of you, help you understand the process and point you in the best direction, then you will refer us whether or not we do your loan. There is no doubt, however, that our process is so far superior to others it really is not comparable. But advocating for you is our priority; your loan is secondary (nice, but still secondary).