Pricing Implications

By
Mortgage and Lending with Secure Financial Center

$13,000.  That's the projected number, after five years, the prospective borrower was looking at between two loan programs. 

His loan officer said that was the best pricing with his credit score and scenario.  I explained to the borrower that may be best pricing, but for the loan officer, not to mention setting the stage for a refi in a couple years.  So, a point up front, a point on the back (undisclosed), with a little lender credit looked fine to the borrower until he knew what was really happening.

As far as I'm concerned, YSP is the borrower's.  They pay a higher rate; they're entitled to benefit from it.  Time for some pricing clarity in the lending industry.

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Rainmaker
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Chris Bates
www.ePropertySites.com - Aliso Viejo, CA

I agree whole heartedly!  The only thing that the mortgage industry has to lose by more clarity is less shopping around and more trust from the consumer!

 

Oct 09, 2007 09:35 PM #1
Rainer
120,473
Richard Sweum
Umpqua Bank - Everett, WA

Hi Tom,

haven't been able to free up any time when I've been over in Snohomish, maybe next week?  Your post raises some interesting issues.  I am curious as what you think is a fair hourly wage for your services are considering your expertise, degree, certifications, etc?  Often times, if I don't charge an origination fee, the only place for me to make any money at all is through YSP.  I discuss this with my client, show him the implications over time, and recommend the best strategy.  I know of other mortgage professionals that charge a flat fee of $2000 regardless of loan size; others that charge three times that amount.  We all have a "mendoza line" of what is acceptable profit.  For construction loans, flat out, my fee is 3pts.  For a first time homebuyer, even though I put a ton of time into education, I usually make a half a point. 

Pricing and determining profitability would be a great topic for a small group!  Cheers!

Oct 09, 2007 09:41 PM #2
Rainer
6,942
Tom Marshman
Secure Financial Center - Everett, WA

Hi Rich,

I'm hit and miss at the office, so call or e-mail when you're in the area.

The hourly wage comparison is a tough one - when does the clock start, at time of application or the countless hours, days, weeks, months leading up to the application?

My biggest beef is the YSP entitlement mentality.  Looking at amortization tables illustrates the true impact that higher rates have over time for the borrower.  Loan officers claiming the YSP generated by the higher rate as theirs without explaining other options to the borrowers, (YSP is often undisclosed because it's run through the LO's bank), is a violation of the trust borrowers place in their "trusted advisor."

Loan officers can and should charge whatever they and their clients feel they are worth.  That's the beauty of the business.  It's the sleight of hand, the hidden pea in the shell game, that bothers me.

As an aside, the entitlement mentality is encouraged in our professional publications.  Look at the advertisements for brokerage or net branch opportunities and what often is at the forefront?  "We're a bank, so no disclosure of YSP."  Somewhat schizophrenic for an industry that wants to improve its image.

Oct 10, 2007 11:41 AM #3
Rainer
120,473
Richard Sweum
Umpqua Bank - Everett, WA

Hi Tom,

I agree...I have the same issue with WAMU still pumping the Neg-am loans day after day, and essentially they are telling brokers...screw up more, we'll pay you more!  I hate it.  I hate being lumped into the same category as the mortgage scheisters on the Radio (except Kiel...they are extremely ethical and I've competed against them a couple of times).

As both a banker and a broker, I know what the yield comparisons are between those two channels.  On the positive side, our correspondent pricing factors are actually better than a lot of wholesale rates, so doing an inhouse loan can actually be more profitable than doing a wholesale loan at the same rate for the client.  At that point, do we give the extra rebate to the client? 

Look forward to talking with you about it more!

Oct 11, 2007 10:46 AM #4
Rainer
6,942
Tom Marshman
Secure Financial Center - Everett, WA

Kiel, haven't heard them on the radio lately...maybe it's the stations I've been listening to. 

That blowhard from Texas is laughable.  His script writer must also work for WWE.

Imagine other professionals advertising like that.  "I figured out how to operate on brains the first day of my practice, been doin' it the same for 13 years.  Anyone that says they know what they're doing and isn't me is wrong.  They don't.  Have me do your surgery.  It's the biggest no-brainer on earth."

As for the extra rebate from a lender?  My business model dictates it goes to my clients.  Beyond that, it's up to individual loan officers, their clients, and proper disclosure.

Oct 11, 2007 08:48 PM #5
Rainer
120,473
Richard Sweum
Umpqua Bank - Everett, WA

Speaking of the WWE, you have to check out

www.ricflairfinance.com

Turn on your audio, sometimes it works, sometimes it doesn't, but it is exactly why I understand how some folks feel when I tell them I do home loans.  Woooooooooooo.

Oct 12, 2007 10:23 PM #6
Rainer
6,942
Tom Marshman
Secure Financial Center - Everett, WA
Nice.  You know, sometimes I think the industry deserves something like that.
Oct 15, 2007 03:50 PM #7
Anonymous
Anonymous

I am reminded that banks do NOT have to disclose fees (those back-door points) but brokers do.  And brokers are trying to change that.  Will this industry ever come to terms with its conscience?  Or will we keep diddling everyone until there are no referrals left?

You did the right thing.

Oct 15, 2007 04:01 PM #8
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Tom Marshman

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