Learn To Read A Lender Rate Sheet & Beat Mortgage Brokers At Their Own Game!
Learn To Read A Lender Rate Sheet & Beat Mortgage Brokers At Their Own Game!
By Rob K. Blake - The Mortgage Insider
Understanding how to price out a loan by reading our Bank Rate Sheets is really quite easy though it may seem intimidating at first. All of our lenders furnish us with rate sheets on a daily basis via the internet or by fax. We follow the rates several times a day in order to properly quote and/or lock the best available rate and term to our customers. When reviewing the rate sheet, we also determine which rate will NOT create a rebate from the lender known as a Yield Spread Premium. We believe upping your rate to make additional revenue over the 1% origination fee is deceptive, dishonest, and a bad business practice…believe me
other’s don’t hold that opinion.
Let’s use the rate sheet data below to demonstrate how we determine the rate that we quote to our borrowers. We will also show you using the corresponding HSH Survey data how other Brokers and Banks are making enormous undisclosed profits in the form of Yield Spread Premium.
This data was collected from a real Wholesale Lender’s (Ampro Mortgage ) Rate sheet dated 03/10/2006. You can confirm the HSH data is real as well by visiting HSH.com.
HSH ASSOCIATES The Nation's Largest Publisher of Mortgage
The Nation's Mortgage Market: Average Rates for Residential Mortgages Week ending March 10, 2006
Owner-occupied 1-4 Family and Condos: Previously Occupied Homes Source: HSH Associates
SURVEY CONVENTIONAL MORTGAGES
15 Yr 30 Yr
National Ave. 6.15% 6.51%
In our example, we will quote our borrower a 30 year rate that carries a lock period of 30 days. If we are seeking to earn only a 1.0% origination fee and NO yield spread premium (back end fee), we will quote the rate of 6.000%. According to the rate sheet, 6.000% actually costs .164% Discount payable to the Lender not Integrity First Mortgage. On this rate sheet, 6.000% is as close to “par pricing” as we can get. As you can see the next higher rate, 6.125% creates .267% of Yield Spread Premium and that’s not good. (YSP’s are shown in (.267) parenthesis). So with this example let’s look at the costs for a loan at
6.00% with us.
Rate: 6.000%, $200,000 Mortgage Loan x 1.0% Broker Origination Fee + 0.164 Discount = $200,000 x 1.164% = $2,328.00
Now let’s show how everyone else does it! First realize that banks and brokers don’t usually quote you
the rate you’ll close with…they “bait and switch” with low-ball rates and artificially lowered closing costs
to get you to apply with them. Then on closing day, the rates and costs are higher than you expected, but
they claim their Good Faith Estimate was in deed just that…an estimate. You’ve got the moving van idling
in parking lot, so you sign. They count on the fact you’ve been painted into a corner and have but one
option…sign.
How do I know this to be true? One reason is 15 years of asking folks, “How did your last loan go…any surprises at closing?” About 85% of those folks answer “Yes” is that one. Second, every closing exit poll conducted by Fannie Mae and Freddie Mac show the same results. But the most compelling reason is up above on HSH Survey data. It shows for the week ending Mar 10, 2006, the National Average interest rate on CLOSED Loans was 6.51%! (NOTE: HSH has an agreement with their 2000+ survey participants to give them closed loan rates, not “lobby rates” or advertised teaser rates.) I guarantee you that all those folks didn’t sign a Good Faith Estimate at application showing them 6.5% because that’s not the rate that’s been all over the news, radio ads, and the internet over the prior 4-6 weeks when these folks were applying. The loan officer for the bank or broker could very easily advertise in the lobby 6% and have them sign at 6.5%...everyone would balk at that. So they show them 6.00%, get them to sign, and then sometime during processing or just at the closing, the borrower is informed his rate had to be adjusted upward. They will get very creative on explaining all the reasons why that had to happen, but suffice it to say, the real reason is they needed the extra revenue that the Yield Spread Premium creates at 6.5%. So with this rate sheet data, let’s look at what they made.
Rate: 6.500%, $200,000 Mortgage Loan x 1.0% Broker Origination Fee +1.498 YSP = $200,000 x
2.498% = $4,996.00
The banks and brokers can’t forgo the Yield Spread Premium overcharging because at the very least it DOUBLES their income for each loan!
Armed with this "insider information" you'll be able to beat Mortgage Brokers and Banks at their own game!
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Rob K. Blake, author of Mortgage Secrets Exposed!and host of the Mortgage Insider Radio show has more help for beligered and confused mortgage consumers at his website http://www.themortgageinsider.net/Home4 or email him for more tips at info@themortgageinsider.net
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Rob K. Blake, author of the book, Mortgage Secrets Exposed! and host of the radio show, The Mortgage Insiders has been teaching mortgage consumers for 15 years on how to avoid all the rip-offs artists laying in wait. Get more tips, tricks, and tactics aimed at turning the tables in your favor at his website http://www.themortgageinsider.net/Home4.
