mortgage secrets

Mortgage Secrets Exposed!by Rob K. Blake and Terri Ewing,

The Mortgage Insiders

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How To End Mortgage Shopping ForeverVisit http://themortgageinsider.net/book.html

Copyright © 2003-2006 Mortgage Insider Media LLC. All rights reserved. 2

November 2004

Dear Rob and Terri,

I am writing to thank you both very much for helping us through the loan process and educating us about Yield Spread Premium. You were very easy to work with, extremely generous with your time and very patient answering all of our questions.

We had very special circumstances, wanting to buy a home and payoff the complete loan with the funds from the home we were selling. Using Yield Spread Premium, you helped us find the best deal, where we would pay the least amount of fees. Even when you made an error that cost you money, you still accepted responsibility and kept your word with giving us the lowest fees possible.

Your book, “Mortgage Secrets Exposed!” is an excellent resource and should be required reading for anyone needing a mortgage!

Thank you for your professionalism and ease getting through the loan process! If we ever need a loan, we will call you again, we will also refer you to anyone we know who needs a mortgage company.

Sincerely,

Trish FDenver, CO.




Table of Contents

Chapter 1 You Are Getting Cheated

Chapter 2 Mortgage Markets

Chapter 3 Bank VS Broker

Chapter 4 RESPA

Chapter 5 The Dirty Little Secret

Chapter 6 A Warning About Banks and Broker-Banks!

Chapter 7 Sound Like a Insider

Chapter 8 About Rate Quotes

Chapter 9 Online Mortgages

Chapter 10 Builder/Agent Scam

Chapter 11 Locking Your Loan

Chapter 12 The Closing

Chapter 13 Final Thoughts




Chapter 1You Are All Getting Cheated!

Our names are Terri Ewing & Rob Blake and we are mortgage brokers. Over the last 13 years, our profession changed from ethical and conscientious to underhanded and greedy. Banks and brokers all over this country prey on the confused and ill informed. Consumers lost all control of the process. The Secretary of Housing and Urban Development, Mr. Martinez claims it is costing American homeowners over $16 billion in closing cost overcharges and unnecessary interest. This must stop.

Very similar to car salespeople, mortgage originators don’t respect the buying public. Consumers sense their contempt and reciprocate with a huge feeling of skepticism or dread when forced to deal with them. The banks, brokers, web portals, and builders are out to service their own needs first, at your expense, and you don’t know the half of it.

We believe mortgage companies and banks should stop charging so much for every loan. What would you say if you knew everyone in America is paying twice what he or she thinks for his or her mortgage? If you think your mortgage cost you $2,500 it really cost you $5,000 and probably more…. and you don’t even know it’s happening!

After overcharging you on closing costs, you overpay every month in higher interest payments. This book explains exactly how the banks and brokers accomplish this. If you knew you would be paying an extra $10,000 to $30,000 in interest payments, would you say yes to that rate? No way!…you would never choose to take an extra $10,000 to $30,000 out of your pocket. The problem is no bank or broker is going to give you a choice on your loan. Every loan is done with this extra profit and no one knows. Well, we are here to tell you everything you ever wanted to know about how a loan gets originated and where the money gets made. After you are done with this book, you will know more than 99% of the loan originators out there and will never have to accept these unfair terms again!




Chapter 2Mortgage Markets

Let’s discuss the 2 markets in the mortgage business and the players in each. This will give you an overview of how everything works.

Primary Market -market where the borrower obtains the loan from the mortgage originator.

You can originate a loan from all of the following:

Banks – depository institution whose sole purpose is to originate, approve, and service loans.

Mortgage Banks (wholesale lender) – a non-depository institution whose sole purpose is to originate, approve, and service loans.

Mortgage Brokers – a non-depository institution whose sole purpose is to originate, process, and can close the loan through a number of different wholesale lending sources.

Web Portals – Can operate either as a bank or broker in originating a loan. For example, E-Loan acts as a bank and Lending Tree acts as a broker.

Builder/Real Estate Company Owned Mortgage Companies – Operate as banks or brokers.

Secondary Market – where closed loans are bought and sold after being pooled and insured.

Fannie Mae/Freddie Mac/Ginnie Mae – quasi-governmental for-profit entity. They establish underwriting guidelines to ensure consistent non-discriminatory approvals nationwide. They insure the payment stream of every loan to the final investor by issuing a certificate for the loan. With this insurance, they create mortgage-backed securities for investors. This allows trillions of dollars to be replenished for wholesale lenders and banks to keep lending money for home loans.




Investors - they purchase the mortgage-backed securities insured by Fannie Mae.

These investors include:

Pension FundsLife Insurance CompaniesCommercial BanksThrifts (Savings and Loans)Fannie Mae/Freddie Mac

Let’s walk you through how all these players interact on a loan. For example, let’s say you need to a conventional FNMA loan. You shop around with different brokers and banks. You create a loan with your local mortgage broker.

This activity, buying a loan at the retail level, is the Primary Market. The broker sells it to a wholesale lender either at closing (called a brokered loan) or later in a bundle with other loans (called a correspondent loan). The wholesale lender gets a FNMA insurance certificate on every loan, including yours and pools it with many other FNMA insured loans at the same rate and term. The wholesale lender will then sell a pool of loans to the final investor, maybe an insurance company or to FNMA itself.

The investors buying pools of loans are the Secondary Market. The lender gets paid to collect your payments (called servicing) which is why you still make the payments to your lender and not the final investor.

You may be asking, “Why is this so important?”

It shows mortgage money is commodity just like anything else. There is a retail market and a wholesale market. In all markets, price goes from low to high as the product/commodity moves from wholesale to retail. (We will show you later where you can get wholesale level pricing/rate data on mortgages. With that data, you’ll be able to spot the rate mark-up!) Take a car for example.

Your local dealer pays wholesale for the car, adds his dealer mark-up to the wholesale price, and quotes you the retail price for that car. If you knew the wholesale price, you would have greater negotiating power with that dealer. This is what Edmonds and Kelly Blue Book provide to car shoppers. A way of looking beneath the sticker price and finding out exactly what the dealer paid for the car. By the end of this book, you’ll learn how to look beneath the retail mortgage rate and determine the wholesale rate assuring you always get the best rate.




Chapter 3Bank vs. Broker

Profit is made when the loan moves from retail to wholesale. The mark-up or profit on a loan originated by a broker is made when the loan closes. This extra amount is on the settlement sheet and paid directly to the broker.

The mark-up/profit on a loan originated by a bank is made when the bank sells the loan to the secondary market. The mark-up/profit is the same for both the broker and bank. However, the broker has to disclose their mark-up/profit at the time of closing and the bank does not disclose their mark-up/profit because it is made after the loan has already closed.

For example, a broker originates a loan. At closing, the broker does not use his or her own money to make the loan. The wholesale lender will provide the funds to close. The broker has originated the loan at a rate that makes a certain mark-up/profit. The wholesale lender exactly knows how much mark-up/profit this loan creates when sold into the secondary market. The wholesale lender will pass a large percentage of their secondary market profit to the broker at the time of closing minus a small cut for themselves.

A bank-originated loan has the same mark-up/profit as broker originated loan. The bank will use it’s own funds to close the loan, pool it with other bank loans, and simply sell it into the secondary market making the mark-up/profit. No one knows about the extra profit except the bank.

Since you can only get a loan from the retail side, let’s talk more about brokers and banks.

Look at the pros and cons of each.

Banks (and those entities acting as banks)

ProConvenienceLess likely to use high pressure or bait and switch sales tactics




ConBank-only productsLimited number of productsOne rate take it or leave itRate is much higherLess willing to negotiate on fees and other chargesExempted from disclosure rules as outlined in the Real Estate Settlement & Procedures Act (RESPA).

Brokers

Pro

Access to wholesale ratesAccess to every product in the marketplaceCustomer service orientedAble to negotiate on feesNot exempted from the disclosure rule

Con

Use high pressure bait and switch sales tacticsMinimal and possibly no licensure required in many statesMore of a salesperson than consultant/bankerNo criminal background checks




Chapter 4Real Estate Settlement & Procedures Act

When it comes to shopping for a mortgage and obtaining the best rate, the Real Estate Settlement & Procedures Act (RESPA) is pivotal. RESPA gives all American homeowners or potential homeowners the following rights.

You have the RIGHT to shop for the best loan for you and compare the charges of different mortgage brokers and lenders.

You have the RIGHT to be informed about the total cost of your loan including the interest rate, points and other fees.

You have the RIGHT to ask for a Good Faith Estimate of all loan and settlement charges before you agree to the loan and pay any fees.

You have the RIGHT to know what fees are not refundable if you decide to cancel the loan agreement.

You have the RIGHT to ask your mortgage broker to explain exactly what the mortgage broker will do for you.

You have the RIGHT to know how much the mortgage broker is getting paid by you and the lender for your loan.

You have the RIGHT to ask questions about charges and loan terms that you do not understand.

You have the RIGHT to a credit decision that is not based on your race, color, religion, national origin, sex, marital status, age, or whether any income is from public assistance.

You have the RIGHT to know the reason if your loan was turned down.

You have the RIGHT to ask for the HUD settlement costs booklet "Buying Your Home."

Up until recently, brokers were not disclosing their mark-up/profit from wholesale to retail in direct violation of rule #6 above. That is no longer the case because of recent HUD crackdowns. Brokers are the only ones required by law to show the consumer their mark-up/profit. Banks lobbied feverishly to make sure they were exempt from this requirement in the hopes of making their loans appear less expensive.




Chapter 5The Mortgage Industry’s Dirty Little Secret

Now, let me tell you the secret no broker or bank wants you to know. Almost every loan has at least 2% (or 2 points), and more often than not, 3% in it for the broker or bank as the mark-up/profit. (This is a good time to toss in a little industry lingo).

A point refers to 1% of a loan amount or $1,000 on a $100,000 loan. We will use the word “point” or “points” from here on out. The mortgage originator will show you only what you pay him for his services in the form of origination fee, mortgage broker fee, or discount point.

In most cases this origination fee normally equals 1 point. What he intentionally fails to show you is what the mark-up/profit pays them for your loan. This is typically another 1-2 points! This doubles or triples the revenue for the originating company.

A listener of our radio show, “The Mortgage Insider Show”, called the other day and wanted a review of his Good Faith Estimate. All of the third party fees were in line and he was being charged a 1-point mortgage broker fee. So far, everything looked right. The rate was 5.875%. At this rate, that broker was getting another 2 points from the lender in addition to the 1 point he told the client about. The broker tripled the cost of his loan. Every loan in America is done this way.

You may wonder, “What is so wrong with this? If it comes from the lender and I don’t have to pay these extra 2 points, why should I be concerned?”

Two reasons:

Not disclosing all charges “paid by you or the lender” is a violation of RESPA. See #6 above. RESPA violations are punishable under federal law and carry a minimum penalty of $5,000 and 5 years in jail for each violation.

The money is a reward to the loan originator for selling you a higher than market rate! For every .25% jump in rate the loan originator can get you to accept, the lender/secondary market will give him a 1-point reward.

For example on a $100,000 loan, you are told the mortgage broker/origination fee is 1 point or $1,000.




You accept the terms believing it’s the only compensation you are paying. However, the loan originator gets you to accept a rate you think is fair, but in reality is .500% too high (6.50% instead of 6.00%). This rate allows the lender to reward the loan originator an extra 2 points or $2,000. From a secondary market perspective, the loan originator produced a loan worth $12,000 more in interest payments due to the higher rate. That is why they will reward the loan originator now with $2,000!

Would you pay $2,000 to make $12,000? You bet! It gets even better for the lender because most of the interest you pay is paid in the first half of the loan. You never get ahead and the lender is making big money of every loan you do. Have you ever looked at your mortgage statement and compared how much of your payment is going to interest and how much is going to lower the principal?

On the $100,000 loan above, you pay $29,893.08 in interest and only $6,079.92 in principal reduction for the first 5 years of the loan. Now you can see why the lenders reward the originators for selling a loan with a higher rate. It means more interest payments for them. It gets even worse because most people only hold a loan for about 7 years on average. They pay the lender all of those interest payments and when the buy a new home or refinance, they start all over again.

The originator can be a bank, a broker, or what I call a broker-bank. Brokers use the lender’s funds and close in the lender’s name. This is called a “brokered loan”. Banks or broker-banks use their own funds or lines-of-credit and close in their own name. This is called a “correspondent loan”.

A broker’s income for increasing the rate on brokered loans is called Yield Spread Premium or YSP. The bank’s income for increasing the rate on correspondent loans is called Service Release Premium or SRP.

Federal RESPA rules that govern informing you of this “extra” profit only apply to the YSP in brokered loans! Therefore, banks and broker-banks are completely exempt from disclosing the “extra” profit they receive on their loans because technically, their loans are not brokered loans.

This reward the loan originator gets for increasing your rate is referred to in many ways. The most common are Yield Spread Premium, Service Release Premium, Overage, Broker Rebate, Lender Paid Fees, or Lender Paid Compensation.

For the remainder of the book we will be referring to it as Yield Spread Premium (YSP) for Brokers and Service Release Premium (SRP) for banks or broker-banks.




Regardless of what it’s called, it is a clear indication your rate is not in line with the market. Therefore when shopping for a mortgage, you must know how to eliminate YSP/SRP.




Chapter 6A Warning About Banks and Broker-Banks!

The one thing this Senate testimony does NOT address is bank/broker-bank SRP compensation! Who’s watching out for the consumer when it comes to bank/broker-bank overcharging? Who will hold hearings and drag bank CEO’s in for testimony? Who at HUD will demand bank reform to stop SRP gauging? NO ONE! And I assure you the banks/broker-banks are just as guilty of padding their loans as the brokers are.

The broker-bank, a hybrid of part-bank/ part-broker, surfaced solely for the purpose of avoiding disclosure laws. They are brokers who figured out a minor change in their operation would put them back on even footing with the banks. Without going into detail, they figured out how to close correspondent loans instead of brokered loans. As learned earlier, this is largely an exercise in semantics, but it does exempt them from those dreaded disclosure laws. Beware of the broker-bank. All outward appearances may fool you into believing you are dealing with a broker when you’re not.

Let’s look at an example, comparing apples to apples…bank vs. broker. The bank and the broker lock a $100,000 loan at 6.00% on the same day. At that rate, there is 2 points YSP/SRP made or $2,000 extra profit on both loans. The broker must disclose the $2,000 while the bank/broker-bank pockets the extra $2,000 without anyone knowing. We would hate to give you the impression from the above letter that brokers and banks price the same...in fact, it’s the opposite! Since banks don’t have to disclose SRP and rely heavily on unsuspecting borrowers, they will always have the highest rate. All mortgage money, even bank money, comes from the same place: Fannie Mae/Freddie Mac/Ginnie Mae and the Secondary Market. Knowing the spread between that rate and the bank rate will uncover their hidden profit. Yes, there is a way to know the Secondary Market rate on any given day and it is revealed later in the book.

The problem is banks/broker-banks are less willing to negotiate with you on rate. They know their exemption of disclosure laws give their loans the appearance of being less expensive in the marketplace. The bottom line is banks and broker-banks are not going to be less expensive.

Since brokers are the only ones the disclosure rules apply to, you MUST use a broker. Use our BUILD™ System and don’t get gouged with Yield Spread Premium and a higher rate costing you $1,000’s on interest payments.




Chapter 7Sound Like a Insider

Here are a few industry terms and you’ll need to sound like a mortgage insider. Used correctly, you’ll have the loan originator believing you are a loan originator too. They will be less likely to use the tricks if they think they are dealing with an insider.

Yield Spread Premium – you know the definition already but let’s put it in a shopping context. When shopping for a loan, you want to make sure that the originator knows to quote you rates and fees with no YSP. Origination/Mortgage Broker Fee – This is the amount that you are paying the loan originator. We believe a reasonable fee here is 1% to 1.5% no more for an owner occupied loan.

Discount Points – These are defined as interest paid up front to decrease your rate. It is a percentage of your loan amount. Be careful, most discount points are used to increase the revenue to the loan originator, not to lower your rate.

Good Faith Estimate (GFE) – Federally mandated disclosure estimating the terms and costs of a mortgage. Usually, it is pure fiction. This document is as honest as the person producing it is.

Third Party Fees – Third party means work performed by persons outside the originating company. For example, appraisal fee, underwriting fee, processing fee, etc. These fees are commonly marked up over the actual originator cost in violation of RESPA in order to increase the profit to the loan originating company.

Junk Fee –This is a term used in the mortgage industry to identify charges that do not represent any work performed by the originating company and are also in violation of RESPA. For example, broker administration fee, application fee, lock fee, loan submission fee, etc. These are complete junk.

LTV – Loan to Value - LTV is important in determining rate. It is calculated by dividing loan amount by property value. For example, a loan amount a $80,000 divided by a $100,000 property value equals 80% LTV.




Chapter 8About Rate Quotes

First of all, the loan originator is not a banker or an underwriter. He’s a salesman. He doesn’t decide if you get the loan. He could just as easily have been selling vacuum cleaners or cell phones as mortgages. He will do or say just about anything to make a sale.

The loan originator/salesperson’s goal is to sell you a loan that makes the company the most money and makes a bigger commission. Now don’t get me wrong, there are many experienced loan originators who know their stuff. They will help you decide on programs and make suggestions on how to structure your new loan. But their advice will come with a steep price tag.

Loan originators who work for brokers or broker-banks get paid on a percentage basis. Usually, 50% or more of the origination fee plus YSP. So it’s in his best interest to sell a loan with as much YSP as possible. The mortgage company obtains extra profit from junk fees and mark-ups it does not share with the originator such as: processing, administration, loan application, etc.

It’s our personal belief after 13 years in the industry 1-1.5% total compensation is fair. On a $100,000 loan with 1-point total compensation, you’d pay $1,000. On a 50% split, a loan originator would make $500. Any loan originator can make a good living earning $500 per loan. We are not going to stop them from making $2,000 a loan by writing this book. We’ll just make sure it’s not on your loan! We are members of the hidden elite here in Colorado and you can get our BUILD™ System to find the elite in your area.

How the Broker quotes you a rate.

Identifies the loan program (30 year fixed conventional, etc.).Identifies the type (owner-occupied, single family, etc.).Identifies an estimated Loan to Value.Identifies loan amount so as not to exceed loan limits. Decides length of lock term (15-day lock, 30-day lock, etc.).Uses a wholesale rate sheet to determine the rate he will quote.

For an example of a rate sheet see below.




It looks a little intimidating at first, but it is really quite simple with some help. There are a few things to note.

Let’s use the “30 YR FIXED” in the upper left corner. On the left border, you will see all the rates quotable for that day. Along the top you’ll see the lock periods. Where the rate and the lock period intersect you’ll see a number. If this number is in parenthesis ( ), that indicates the amount of YSP the lender will pay the originator. If this number is NOT in parenthesis, that indicates the amount of discount points the originator must pay the lender.

For example, find 6.375% rate on a 30-day lock. The YSP is (2.125) meaning if your loan were $100,000 the originator would make $2,125 in YSP.

Also, underneath the rates are add-ons. These are added to the price or YSP to determine rate. (CO is cash out, NOO is non owner occupied, loan limit add-ons.)

As you can see, the originator is not given a single rate for the day…he has a range of rates he can quote you every day.

This is where the “bait and switch” happens. He will quote you a rate with no YSP in the hope of luring you in with a very attractive rate that will mysteriously disappear during the processing of your loan. This happens every day. They will even put it on the initial loan application knowing you will not close at that rate.

How a Bank Quotes You a Rate.

Loan originators at a bank follow the same steps outlined above except when they grab a rate sheet it is a bank produced rate sheet with only the bank’s rates on it. You get a false sense of security from a bank because, after all, they have never taken advantage of you in the past…right? Wrong!

The bank is taking advantage of you in the worst way possible. The banks are TOTALLY EXEMPT from disclosing their SRP! (Obviously, the banks have much better paid lobbyists than the mortgage brokers) The bank produces a daily rate sheet for its employees to use. Within this rate is the bank’s SRP they do not have to disclose to you or their own employee for that matter. The bank employee has no idea what wholesale rates are or how competitive his bank really is. They just quote a rate…take it or leave it.

The only good thing is he won’t chase you down the street if you walk out. Banks don’t really care about being competitive in the retail marketplace. They get plenty of business from those who have blind faith in the fairness of their bank.




The Good Faith Estimate.

When a bank or a broker quotes you a rate, they usually follow it up with a Good Faith Estimate. This is an estimate of your rate and costs for the loan. Shopping using a Good Faith Estimate is useless. The salesperson will fabricate the information on this document all day long. Check out our blog. We always find new articles on the Bait and Switch perpetrated all over the country. The Good Faith Estimate is one of the ways the bait and switch is pulled off. They issue a GFE with a rate or costs or both there is no way in the world they could deliver. You sign the application and GFE and then show up for the closing. At closing the rate, costs, or both are higher. The originator may try to blame it on you or they may not even answer your phone when you try to call them on this. They bank on you just signing and going home to lick your wounds.

Get our BUILD™ System and learn how to find the hidden elite of the mortgage industry. Along with finding the best of the best, we also show you how to read a Good Faith Estimate. That way, you have faith in the person providing the Good Faith Estimate and you understand what you’re looking at. We also teach you how to get and understand a wholesale lock confirmation. This document will prove there is no money generated from increasing your rate.

http://themortgageinsider.net/blog/

http://themortgageinsider.net/book.html




Chapter 9Online Mortgages

Web portals are as guilty of making extra profit on your loan as any loan originator on the street. If you search for a loan on the web, you will run into two different types of companies. One is a list broker. They are not in the mortgage business. It is their job to persuade you to enter your information on a website. They sell your name and information to a number of different companies who have paid sometimes up to $25 for it. Unfortunately for you, your information is sold to several companies and they will hound you for business.

The other company is a retail branch of a bank/lender or a broker. They also want you to enter your information and apply for a loan. Their big selling points are convenience, speed, non-commission sales people, and low rate. They will tell you they can provide a low rate because their overhead is low and the savings will be passed on to you. Total fantasy. The rate would be the same as any other company including the extra profit in it for them.

Two big web portals are Lending Tree and E-Loan. Lending Tree claims you will get the best loan and lowest rate because lenders compete for your loan. This could not be farther from the truth. If you read their licensing disclosures, you will find they act as a broker in many states and actually increase the cost of your loan by imposing a "Computerized Loan Origination (CLO)" or "co-broker" fee of $760 simply because you used their site to post your application. Also, they do not guarantee you the lowest rate. They say they will try to get your information to at least 4 lenders. Again, you will be inundated with loan originators who received your lead from Lending Tree. Lending Tree is a lead generator that hands out leads to other companies that have all paid over $25,000 to join their network. It is no different than picking up the phone and calling salespeople except you get charged an extra $760!

E-Loan is a broker-bank. By now you should know why we say not to use banks. Just in case you don’t here it is again. Broker-banks do not have to disclose the extra profit they make on your loan.




Chapter 10Builder/Agent Scam

Builder Mortgage Companies

These guys may be the worst of all. They will close in their own name so they are a bank or broker-bank. They offer incentives to buy a home but there is a catch. You have to use the builder’s mortgage company. This is a huge problem. First, they will cook up imaginary incentives and then pull them away from you if you want to use another mortgage company. Second, their rate will be higher making them huge profits on the increased rate.

These incentives are made up. The builder will put a price tag on upgrades they give you to use their mortgage company. Unfortunately, the upgrades won’t increase the value of the house. But the builder tells you it will. You think you have negotiated a great deal with all of these upgrades for free.

It doesn’t cost them anything to give you these upgrades. The sad truth is it doesn’t add any value to the home and you paid dearly in rate for nothing. You may have even paid more for the house because they tricked you into believing these upgrades would add value. Trust us…. we used to work for a builder mortgage company. They actually had meetings trying to teach us loan originators the art of extortion. We had to tell our client, if they didn’t take this obviously higher than market rate, the incentives would be gone.

Any time someone is trying to get you to use their mortgage company and whatever incentives are offered disappear if you go elsewhere, that should be a red flag. They are making money and loads of it off the loan or they would just give you the incentives for buying the house! It is so unfortunate homebuyers don’t sit down and think about this before they agree to use the builder mortgage company.

Real Estate Mortgage Companies

Also, there is a new trend in real estate brokerages. Setting up title and mortgage companies to make more profit for the broker. Horrible idea to use one company for all things. It is a license to steal. They are hoping to shove you through the process without you shopping around for the best deal. They call it “one-stop shopping”. I call it One Giant Rip-off! This gives them the ability to put you into something that only benefits them and not you.




This also goes for the recent influx of insurance companies, brokerage firms, or accounting firms who are relying on their big name and the fact that you already have done business with them. Again, it doesn’t matter whom you choose they will all make YSP/SRP.




Chapter 11Locking Your Loan

Locking is the procedure used by your originator to guarantee your rate is confirmed or “locked” with the wholesale lender. All wholesale lenders use a form (or possibly a website) where the originator outlines the important terms of your loan and the desire to lock that day’s published rate. The originator cannot lock any other rate except that day’s rate. You can only lock from the time the rate sheet is issued in the morning to the wholesale lender’s cutoff time, which is usually at 4:00pm in their time zone.

He will note the length of the lock, 15 days, 30 days etc. As you learned on the rate sheet above, the length of lock requested effects the YSP…short locks for the same rate, yield more YSP. Make sure your lock does not expire before you complete your transaction.

An expired lock can cost you dearly. An expired lock can put you back in the market under “worst case” rules. This means whichever rate is higher (the current rate or your expired lock rate) that is the rate you get. The bottom line is close inside your lock!

Here’s a few tips on lock periods you and your originator may not be aware of:

On refinance transactions, find out the originator’s realistic time frame for finishing your loan. If it is about 15-20 days…a 30-day lock will do.

If you are buying an existing home, the same holds true. But only if you have an executed, accepted contract and foresee no troubles with inspection or possible appraiser-forced repairs that could extend the closing or kill the deal.

If you are buying a new home you might be tempted to pay for an extended rate lock. No one can tell you what rates will be 5 days out, much less 5 months out, so paying to lock in today’s rate when they have a 50/50 chance of being lower in the future seems ridiculous.

With new construction, deciding the lock length when closing time grows near is much more important. Don’t even consider locking until the builder has the certificate of occupancy or “CO” in hand. This is a letter from the local Building Inspector’s Office confirming your house has past all code inspections necessary for occupancy. The CO is issued usually when the “sheet rock” stage of construction is complete. The builder will still have a lot of work to do but most likely you’re within the 30 day lock length. Talk with the builder. Get his take but never believe he’ll be ready to close within 30 days if the “sheet rock” stage is not finished.




Locking your rate is pivotal. First, you do not even have a rate until you are locked. All the rate discussions and disclosures are fantasy until locked by the wholesale lender. The rate could have gone from 5.50% to 6.00% in 72 hours and you would have no idea. Rates move every day and sometimes during the day. Relying on your loan originator to lock you at the best time is a huge mistake. Second, if you don’t lock appropriately, all of your shopping will go to waste. It is your responsibility to know the market and lock your loan.

Unfortunately, most borrowers wait for the loan originator to tell them when to lock. Believe it or not, originators don’t watch the market and call everyone the minute the rates drop. They usually don’t think about locking until a week before closing. They need time between application and lock…and the more time, the better. The originators first concern when locking is how to build in his 1-2 points YSP. In other words, when to pull the “switch” of the “bait and switch”.

Another more sinister reason for waiting to lock is the originator has more leverage when it comes to raising your rate or your costs when closing is near. If you are 7 days away from closing, are you really willing to start the loan process over with someone new over a .250% jump in rate? Do you really have a choice? Waiting until the last minute to lock backs you into a corner that will cost $1,000’s. This last-minute locking tactic insures the originator’s 1-2 points YSP. This is the way he’ll close every loan this year…so watch out!

Remember how most unsuspecting borrowers begin the process? They were quoted a low rate with no YSP to get them to commit to a loan. The loan originator knows he has got time before locking to manipulate the loan to insure his YSP.

Here are three switch techniques the loan originator uses when locking to sweeten their commission. No one is exempt from this switch. It happens on every loan. For example,

If rates have stayed the same, they will tell the borrower rates have gone up .250% and that will get the loan originator the 1% YSP.

If rates have gone up .250%, they will tell the borrower rates have gone up .500% and that will get the loan originator the 1% YSP.

If rates have gone down .250% they will tell the borrower rates have stayed the same and that will get the loan originator the 1% YSP.

Get our BUILD™ System and learn how to get and read a wholesale lender’s lock confirmation. This document proves you are locked so no bait and switch!

http://themortgageinsider.net/book.html




Chapter 12The Closing

By using our BUILD™ System, you shouldn’t have to worry about the closing of your loan. You found the hidden elite of mortgage brokers and have all the documents in your hand to prove the loan you wanted is the loan you get.

Here are 2 things to always do before your closing:

Always tell the loan originator you have to close at 9:00am and make sure to close at the title company. This is important because if there is a mistake, it is early in the day and any correction can be made before close of business. If you close late in the day, people may have gone home and you will be signing incorrect papers with no one to correct them.

Inform the loan originator you need to review the closing statement a day prior to the closing. According to RESPA rules, you can request the HUD1 Settlement Statement a day prior to the closing.

Here are 2 examples of Page 2 of HUD1 Settlement Statements …Page 2 is where all the charges are listed. In these examples, the first HUD shows a closing with YSP and the second one is without YSP.

In our BUILD™ System, the Good Faith Estimate, the wholesale lock confirmation and the HUD closing statement are all in line. No surprises here!




Chapter 13Final ThoughtsYour home mortgage is the biggest financial decision you’ll make and you’ll make it 6-7 times in your life. Give it the attention it deserves. If you do, you’ll save $100,000’s over your home-owning lifetime.

If you live in Colorado, or have property in Colorado, give us a call. Obviously, we follow our own rules so you don’t have to worry! If you are not in Colorado, get our BUILD™ System. With this system you find the hidden elite of mortgage brokers, learn how to get and read all the documents before you close, and learn how to build a relationship with you broker so you never have to shop for a mortgage again!

Integrity First Mortgage and the hidden elite will:

Offer unbiased advice on the appropriate loan for your situation. Only charge 1% (We used 1-1.5% in total compensation throughout the book, but

that was to encompass the entire country. Many states are more expensive to close a loan than Colorado, so that was for our out of state book owners. In Colorado, 1% Total compensation is sufficient.) as a fee to Integrity First Mortgage, Inc.

Make sure you sign all required disclosures Fax you the lock confirmation from the wholesale lender.

For those of you in the market now, Happy Hunting!

We Currently Only Service Loan Clients with Colorado Properties!But You Can Learn How To Find a Like-Minded Broker in Your Locale with our BUILD System™ - Click Here

Integrity First Mortgage, Inc.4610 S. Ulster Street, Suite 150Denver, CO 80237

Office Phone: (303) 575-1616Toll-Free: 1 (877) 30-APPLYFAX: (303) 223-9119

Owners of Integrity First Mortgage:Rob K. Blake (303) 575-1616Terri Ewing (303) 575-1616




E-mail: [email protected]: http://www.integrityfirstmortgageinc.comFor more information about mortgages:http://themortgageinsider.net

“Dear Rob & Terri:

VICTORY! I wanted to let you know yesterday went off without a hitch.

I made it perfectly clear that I was not going to be penalized for my commission based income, nor was I to pay any YSP. The look on his face when I quoted him the current rate was well worth the price of my book. Knowing exactly how much and the means by which he was making his money made the process much less daunting. The confidence I had walking away from the table after locking (in writing) was a wonderful feeling.

You saved me money, time, and much consternation, for which I am truly grateful. Most of all thank you for your honesty.” -- J. Turra, Denver CO

Rob Blake and Terri Ewing are the hosts of “The Mortgage Insider Show”, the authors of Mortgage Secrets Exposed!, and the founders of Integrity First Mortgage, Inc. They

have a combined 23 years of mortgage experience and strive to educate and inform borrowers about the mortgage industry. They developed the “No Yield Spread Premium”

loan concept and hope to one day change the entire industry into adopting this practice voluntarily…putting ‘integrity first’ back in the mortgage process.

http://www.integrityfirstmortgageinc.com/

http://themortgageinsider.net/


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