Monday, February 23, 2004

I Didn’t Get the Position

I recently applied for a writing position in the financial industry and I submitted a couple of articles as part of the consideration process.  Alas, I did not get the position.  Since I do not want the pieces to just sit in my computer, forlornly, I thought I’d share one I had written for consideration.  The following piece is titled “Big Chicken Dinners” and within it I share some of my experiences with the high risk mortgage industry.

The economy is good , the economy is bad, Americans are wealthier than ever before, there are more Americans in poverty than ever before, what is an individual to believe, and, does what is stated in those words apply to you?  They may or may not apply to you, depending on your current circumstances.  What I want to look at today are Big Chicken Dinners, or, for those of you unfamiliar with mortgage lending lingo, loans for individuals with less than perfect credit.  Mortgages rated B, C, or D, depending on your credit rating.

A paper mortgages have been around for a long time.  An A paper mortgage is for an individual employed for at least 2 years and has maintained good credit.  Meaning the individual pays his bills on time.  B, C, and D paper mortgages are for those individuals with somewhat checkered employment histories and who pay their bills in varying degrees of lateness.  Somewhat late, B paper, mostly late to usually late, C paper, or always late and approaching bankruptcy, D paper.

Mortgage lenders who write these Big Chicken Dinner loans have a mostly negative reputation.  Some of them deservedly so, but the fact remains that these type of loans, and the lenders who offer them, play an important role in the mortgage industry, and, more importantly, as a cash flow provider savior, or devil, to the borrower.

If you are a home owner who is in financial difficulty, and have equity in your home, a Big Chicken Dinner mortgage can be just what is needed from the mortgage lending menu.  These mortgages can be applied as the band aid you need to effect the healing your financial wounds require.  The trick is to have a basic understanding of how to read the HUD-1 Settlement Statement when the time comes for you to sign the papers provided by the mortgage buffet of your choice.

The most important items to pay attention to, before you actually sign the bill, are junk fees, service release premiums (SRP), and origination fees.  First, the origination fee.  Origination fees are fees that go directly to the lender from your pocket.  Like paying for a hamburger, origination fees are the price you pay to work with that particular lender.  In today’s marketplace, they typically do not exceed 1% of the mortgage amount.  Thus, if you are borrowing $100,000.00 dollars, the origination fee should not exceed $1,000.00.  Next, let’s consider the junk fees.  Junk fees, depending on the creativity of the mortgage lender, can take on many guises.  The junk fees may be called a processing fee, a commitment fee, a lending fee, a document preparation fee, or all of the above, and can add up to a large number.  If the junk fees are more than $300.00 to $500.00, you are paying for gravy that the meal does not need to enhance its taste.  The SRP fees, are fees that are paid to your server. In this case the guy sitting across the desk from you (your server) representing the mortgage broker you are dealing with, by the full service mortgage lender/restaurant across the street.  SRP fees are kind of funny.  They will show on your HUD-1 many times in brackets.  What SRP’s actually are, are monies paid to the mortgage broker, your server behind the desk, by the ultimate provider of your mortgage, the lender or the guy you will actually make your payment to.  A simple way to think of this, is, you are at a restaurant, you order your Big Chicken Dinner, your server walks to the kitchen with your order, and a different restaurant delivers, through the back door, your meal, without you being aware of this.  There’s nothing illegal about it, they’re just not serving food they’ve prepared and the SRP reimburses the broker you’re working with for selling the actual lender’s stuff.

Big Chicken Dinner loans can taste good, but you must take care when ordering.  Ask someone who has had one.  They can give you an opinion as to the quality of the meal served.  It may be the Big Chicken Dinner was very, very good, or, it may have brought on such a severe case of food poisoning the individual is still suffering and in worse financial shape than before.

Posted by John Venlet on 02/23 at 10:29 AM
(0) Comments • (0) Trackbacks • Permalink
Page 1 of 1 pages