Posts Tagged ‘borrowers’

Borrowers Are Arguing Over The Wrong Thing

By Rick Soukoulis | October 14th, 2011 0 Comments

If you’re around home sales and mortgages for any length of time, you understand how borrowers get very excited over an eighth of point in rate.

Before securitization, there could be a pretty wide difference in rates, and it made sense to shop around. Mortgage rates were a lender-specific phenomenon, and rates could vary pretty noticeably from lender to lender.

Now, there’s pretty much a standard rate that’s determined by FNMA and by the mortgage backed securities market, and the differences between lenders are pretty small.

Still, borrowers will shop.

The internet has, of course, played a big role in this.  A borrower can spend a few minutes at a computer and get rates from 20-30 or more lenders.  The rates won’t vary a huge amount, but it can be very seductive.

If we do the math, though, borrowers are focusing on the wrong thing.  The monthly savings by saving an eighth in rate just don’t amount to much.

Let’s look at a 30 year fixed rate loan for $300,000.  At 4-1/8% the monthly payments will be $1,432.  Now let’s assume the borrower shops all over town, spends hours on the internet, and he finds a lender at 4.0%.  Guess what, his payment drops by only $21!  That’s $252 a year, and even if the borrower stays in the house for eight years, it’s barely $2,000.

It just isn’t all that much and in today’s world where the wrong lender can mean no closing.

Wouldn’t buyers be better off negotiating a lower price of $3,000?  Or a $4,000 credit towards termite repair.

When a Realtor recommends a lender, it’s because he or she knows that lender to be dependable. And closing on time can be a lot more important than saving an eighth of a point in fees.

Rates matter.

But it’s more important for borrowers to have a good Realtor to negotiate the best possible deal.

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Lender Lawsuits Cause Halt for Purchasers

By Kristen Para | March 15th, 2010 0 Comments

Borrowers in the higher end homes are sticking their feet into cement bricks at their homes and not budging for foreclosures. Not literally, but homeowners are not being as reluctant for the cash for keys scenarios anymore. Hollister is seeing a growing trend of borrowers, who have received foreclosure notices,  seeking legal aid to keep them stay in their homes in order to allow time for loan modifications or additional months without payment. Borrowers are arguing that the lenders never disclosed the terms of the loan or never really qualified for the loan which creates a problem for the revolving world.

All the expected trustee sales from last year will not be available for purchase to the public, so buyers will not be able to purchase and receive the extended tax credit which needs to be in contract by the end of April. While people are looking for new beginnings, some people are struggling to keep what they have. Until the market is at a fuller recovery, all buyers, sellers, Realtor, escrow and title companies, lenders will have to stay on their toes as to where the market will transition to next.

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Mortgage That Matters: A MORTGAGE IS NOT A COMMODITY

By Rick Soukoulis | February 9th, 2010 0 Comments

From time to time I hear people saying that the mortgage loan officer is a dinosaur.  The reasoning is that a mortgage is commodity, that every mortgage has the same criteria, and that they are, therefore, mere commodities.

By extension, the argument goes, borrowers do not need humans involved in the process, and that they can benefit from reduced costs by eliminating the human element from the equation.

When I hear this argument, I wonder if the person ever got a mortgage.

If they had, they’d know that the “human element” is critically important and that many, if not most, borrowers would never be able to buy a house without assistance from the Realtor and the loan officer.

As an example, think about all the subtleties of various loan programs.  Let’s assume a borrower goes online and choose Program 1-A and gets turned down.  He then applies for Program 2-A, Program 3-A and Program 4-A, getting turned down at each of them.

At this point, does he get so discouraged that he simply gives up?

Had their been a loan officer and Realtor involved, he’d have known that of the ten programs offered, he only qualified for the tenth one.  A knowledgeable loan officer could have steered him right away to program 10-A and made certain he chose the right loan program to match his individual situation.

One argument for eliminating the human element also has to do with the reduced number of programs. The argument is that loan officers were needed 2-3 years ago when there were hundreds of programs, and the borrower needed help choosing among all these choices.  Now, they, say, it’s either a conventional 30 year fixed or an FHA 30 year fixed, and anyone can choose between these two.

Again, no one would say this if they’d tried getting a loan recently.  Awhile the number of programs has, indeed, shrunk, it’s a heckuva lot more than two.  And more importantly, while there maybe be fewer programs, they’re all much harder to qualify for.

A good loan officer can help borrowers choose the right program and help them qualify for that.

And no computer program can ever do that as well.

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