Tuesday, June 01, 2004

Mortgage Scaremongering

USA Today has an op-ed posted, unsigned of course, titled “Take ‘sticker shock’ out of home-loan borrowing." Right out of the gate, the op-ed summons up the big, bad, mortgage bogey man.

"Consumers can find out upfront the cost of most services they buy. Many lawyers charge by the hour, Realtors take a percentage of a house sale, and credit card companies must disclose their rates and fees.

But when the biggest purchase most folks make - a home - is involved, consumers can only guess at the fees they’ll pay for a mortgage, appraisal, title insurance and other items needed to finalize a loan. Because of lax federal rules, mortgage lenders, title companies and others involved in the transaction can hide behind “estimates” of fees that can turn out to be hundreds or thousands of dollars higher at settlement."

The op-ed ends, natch, with the call for more govmint, since those mortgage lenders are nothing more than predators with weak estimating skills.  I call bullshit on USA Today.

I’ve written more than my share of mortgages over the past fifteen years and I can unequivocally state that the Good Faith Estimates I wrote for my clients were, 95% of the time, accurate to within $200.00, usually within $100.00 or less, and at times, that $200.00 margin of error was in the borrowers’ favor.

Now, don’t get me wrong.  Some loan officers can’t estimate worth a damn, and some lenders do not care if their loan officers can’t estimate worth a damn, but those loan officers and lenders who don’t give a damn about the erroneous quality of their estimates, are not going to keep clients.

Some advice.  If you go to a mortgage closing, and the final figures are way off, say more than $300.00 to $500.00 out of line from the estimate, raise holy hell right at the closing table.  Tell the lender you will not close unless they adjust their fees downward, to within a reasonable range of the estimate.  Also, look very closely at the HUD-1 Settlement Statement. Look for a line item on the HUD-1 that is labeled Service Release Premium (SRP) or Yield Spread Premium (YSP).  The number shown will, typically, be in parentheses, indicating monies being paid to the lender after the loan closes.  If that number is more than 2% of the loan amount, you can bet your sweet bippy the lender will adjust your costs down and take the hit himself.  Nobody gets paid if the loan doesn’t close.  Granted you don’t get your mortgage either, but believe me, the lender, the loan officer, the title company, the Realtor, everyone wants to get paid, and the only way they will is if you sign the documents and close on the loan.  Stand up and bitch, state you won’t close, demand satisfaction, you’ll probably get it.  And you won’t need the govmint’s help, either.

Some final words of advice.  Remember the old adage that you get what you pay for.  If the Good Faith Estimate looks too good to be true, well, it may very well be too good to be true.  Also, choose a lender wisely.  Ask your friends who have recently taken out a home mortgage, or your work associates.  Ask questions and you’ll get, or find, answers.  Or, drop me note, I’ll look at your HUD-1, as compared to your Good Faith Estimate, gratis.

Posted by John Venlet on 06/01 at 03:32 PM
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