Transparency with mortgage originations and refinance

I follow Dan Green of The Mortgage Reports because he adds transparency to the world of mortgage.  It’s an interest of mine because I’ve spent the past 5 years providing software to some of the same mortgage servicers that he sells his mortgages to (I’m assuming here, but pretty sure).  The big difference is that the software we provide is to manage the overwhelming large default mortgage accounts that the servicers are facing in this economic dip.  Dan’s focus is new performing loans.

The focus of my post is to call attention to a post over on Dan’s blog that exposes some truths about published rates.  Those of us who have gone through the mortgage process understand that a mortgage is not just a matter of “locking in” a rate, but also having the cash to close the deal.  These extra fees and costs associated with a mortgage can often times break a deal up.

It’s a mixed bag of charges that involve all parties such as the mortgage broker, the mortgage company, the closing attorney, inspectors, surveyors, title companies, etc.  One of those variables that Dan points out are Points.  Points are percentages of the mortgage to be paid in cash to buy down the rate to a specific value.  Dan can probably define Points much better than I can, but my point about Points is that they can break deals up for people trying to refinance or buy a home.

As a mortgage consumer I think I can speak for most and say that during the house buying or refinancing process paying extra Points, charges, fees, etc is the absolute last thing that we want to hear to get the deal done.  Yes, rates are down, but as Dan makes clear, Points are up.

This is for two reasons I think: 1) Mortgage servicers are completely overwhelmed with the surge of refi’s so in order to catch up, they increase price (points) in hopes to reduce the number of people wanting to refi. 2)  Mortgage servicers have higher losses than they have ever experienced before because of foreclosures (the industry I’m in), so to help cover some loss they are trying to make cash through origination and refi points.

Its a give and take, but the more transparent mortgage companies and mortgage brokers can be with borrowers the more deals they will do.  Consumers are becoming more and more educated each day and less patient when things aren’t so clear.  My advice to the consumer is to ask as many questions as possible about what the total cost to close the deal will be.  My advice to the mortgage broker and mortgage servicer is to be as transparent with information as early in the deal as possible.  Realize that the internet has exposed your business just like many others and be a leader in sharing how your business works with the world.

Whether the consumer has lots of cash or limited funds, the common question will always be “what will it cost me”.  Be proactive in helping me as a consumer understand my costs, what can be negotiated and how you can help me.  You will win big in the end because if I trust you, I will be a life customer.

Best of luck in your mortgage journey

January16