Mortgage Broker is "broker"

[Mango]

On the day I locked, lenders repriced several times. According to my broker, Chase offered the best deal on a 7/1 IO ARM, so I told him to lock me in. After I was locked, I asked him to disclose the YSP. He said, and disclosed on the GFE, that Chase was paying 1 point on my loan of roughly $600K. I told him I was only willing to pay him $3K out of YSP for doing the deal, but he negotiated me upward slightly. He applied the remaining YSP toward my closing costs and I signed the documents.

As far as Paulson's plan goes, it only applies to subprime borrowers, of which, I am not one. However, if I was a subprime borrower, it sure would feel good to know I could get bailed out if my investment didn't turn out as expected.

Little Fish

This is where I take issue with your transaction. Why didn't you at application make it clear what you were willing to pay or what you felt was justified income to the Broker? You could have signed a Broker Fee Agreement stating you wanted to only pay $3000 in Broker Fee and ask for 0 to be put for YSP. You could have shopped the rate to see if you could get a lower rate where their YSP would have been .50 point. I'm betting you had already done that and got kicked to the curb by other Brokers. If your loan was already in process when you locked, you wasted your time and your Brokers by not being forthright, but probably at that point decided he had already invested enough time on you, give you what you ask so he could move on to the next loan. So who was playing the game here? It worked out for both of y'all in the end you claim, but I can tell you 1 point is not unreasonable in this credit environment to get an interest only investment property through underwriting when Banks are foreclosing by leaps and bounds on past speculators, yet you have tried to insinuate that Brokers are raping their clients with YSP.

What about the guy who is looking to buy his first primary residence, only has 10% and is slightly short of closing costs. Wouldn't YSP be a way a Broker could help him get into a house if he qualifies from a debt ratio standpoint? I am sure you don't care though based on your last statement regarding bailout.

 

[Diane4145]

Mango,

Seems to me, that you seem to have a better understanding of the industry, than LF. Ya gotta love a person standing up for what they feel, is right!

This is where I take issue with your transaction. Why didn't you at application make it clear what you were willing to pay or what you felt was justified income to the Broker? You could have signed a Broker Fee Agreement stating you wanted to only pay $3000 in Broker Fee and ask for 0 to be put for YSP. You could have shopped the rate to see if you could get a lower rate where their YSP would have been .50 point. I'm betting you had already done that and got kicked to the curb by other Brokers. If your loan was already in process when you locked, you wasted your time and your Brokers by not being forthright, but probably at that point decided he had already invested enough time on you, give you what you ask so he could move on to the next loan. So who was playing the game here? It worked out for both of y'all in the end you claim, but I can tell you 1 point is not unreasonable in this credit environment to get an interest only investment property through underwriting when Banks are foreclosing by leaps and bounds on past speculators, yet you have tried to insinuate that Brokers are raping their clients with YSP.

What about the guy who is looking to buy his first primary residence, only has 10% and is slightly short of closing costs. Wouldn't YSP be a way a Broker could help him get into a house if he qualifies from a debt ratio standpoint? I am sure you don't care though based on your last statement regarding bailout.

 

[Bob]

This is where I take issue with your transaction. Why didn't you at application make it clear what you were willing to pay or what you felt was justified income to the Broker? You could have signed a Broker Fee Agreement stating you wanted to only pay $3000 in Broker Fee and ask for 0 to be put for YSP. You could have shopped the rate to see if you could get a lower rate where their YSP would have been .50 point. I'm betting you had already done that and got kicked to the curb by other Brokers. If your loan was already in process when you locked, you wasted your time and your Brokers by not being forthright, but probably at that point decided he had already invested enough time on you, give you what you ask so he could move on to the next loan. So who was playing the game here? It worked out for both of y'all in the end you claim, but I can tell you 1 point is not unreasonable in this credit environment to get an interest only investment property through underwriting when Banks are foreclosing by leaps and bounds on past speculators, yet you have tried to insinuate that Brokers are raping their clients with YSP.

What about the guy who is looking to buy his first primary residence, only has 10% and is slightly short of closing costs. Wouldn't YSP be a way a Broker could help him get into a house if he qualifies from a debt ratio standpoint? I am sure you don't care though based on your last statement regarding bailout.

Little Fish, That's a very revealing "look what I did post". On the one hand you trash brokers, then you use the hell out of one on an I/O investment property transaction to mitigate your closing costs. A banker would have kicked you out the front door on the whole deal with no disclosure of their own institutional yield. That you would blind side your broker to participate in his/hers renumeration shows your the kind of guy who deserves a few curb marks. Assume the position please.

 

[Little Fish]

Mango:

In the spirit of full disclosure...

The reason I didn't tell the broker what I was willing to pay at application, was because at that time, I had no clue how YSP worked, or what my broker was going to earn. This was the first time I've ever gone through a broker to secure financing. The broker I am working with was a referral from a friend, so I decided to do things differently this time and gave him a call.

When my broker provided the first GFE, several days before I ended up locking, I was lead to believe there was no direct compensation to the broker other than the junk fees. He did not explain YSP to me.

Since I was looking at a GFE that seemed to indicate very low fees, I wanted to check with someone who could understand and explain exactly what I would be signing. Therefore, I recalled that my sister in Sarasota was dating a mortgage broker who owned his own business. I gave him a call and asked him to explain what I was signing.

That was when I learned about how YSP worked. He taught me how to negotiate with the broker. He explained to me that YSP was my money and that I could pay the broker out of YSP, use it toward closing costs, or do some combination of both. He said in this environment, with my credit score, etc., every Bank was looking to do the deal with me. He said I didn't need to deal with Brokers, but should call lenders directly. I told him I didn't have the time to call around and compare rates and terms.

He was the one that explained to me that reasonable compensation for a deal of my size is roughly $3K (1/2 point). He said in today's environment, brokers would do it for even less. I was not looking to screw the broker, but was attempting to improve my deal and provide him fair compensation for his efforts.

I never insinuated that all brokers are rapng their clients, only that many of them do not disclose to their clients how YSP works and how they can use it to benefit their situation. My broker was silent regarding this issue which meant that he intended to take 100% of the YSP without as much as a discussion. There would have been no negotiation if I hadn't learned of the system while going through this process.

Coincidentally, after the deal was finalized, I went back to my friend who made the referral and asked him about YSP. He said he had never heard of it and then went on to say that he worked with this broker on three separate occassions in the past. I guess the broker never disclosed this to him either.

Additionally, I asked folks around my office if they knew how YSP worked and no one did. That tells me that many brokers are not explaining YSP to their clients, which also means, clients haven't received the best deals that they could have.

Since it occurs to me that the system is misunderstood by many, if not most, I believe it would be better to do away with YSP altogether and disclose the broker fee on line 802 of the GFE.

As for your example of the first time homebuyer without enough funds... I agree the YSP system can help him.

That said, my only problem is with the nondisclosure of YSP in terms that the average person can understand. If a prospect understands the fee and accepts the terms, there is no problem. However, it's an entirely different matter when the prospect has no clue.

Little Fish

 

[Little Fish]

Bob:

I received a good deal and improved my understanding of the industry which will pay dividends over time. Hopefully others on this board have benefited as well.

If you've read my latest response to Mango, I believe you will feel differently about your concluding comments.

Little Fish

 

[Little Fish]

Diane:

I just want to take the time to Thank You for all of your invaluable contributions to this board.

Little Fish

 

[Mango]

Little Fish, That's a very revealing "look what I did post". On the one hand you trash brokers, then you use the hell out of one on an I/O investment property transaction to mitigate your closing costs. A banker would have kicked you out the front door on the whole deal with no disclosure of their own institutional yield. That you would blind side your broker to participate in his/hers renumeration shows your the kind of guy who deserves a few curb marks. Assume the position please.

I wouldn't waste my time Bob. Little Fish only can sneak around the reef for so long before they either get put in a tank or get swallowed whole by the Big Fish.

Little Fish I read your explanation and frankly I can not believe that you did not understand the portion of the Good faith Estimate that clearly says "Compensation to Broker"-Not paid out of Loan Proceeds" and that you were ignorant enough to not ask your Broker. You're addressing one of the top producing Brokers in the NE in loan volume, and I have never had a client not ask me what YSP is who didn't understand. :roll:

 

[SHELLY]

We ended up disecting my personal experience partly because the only way to discuss the matter is by using a real example. Additionally, I thought it expedient as a teaching method to benefit those who never realized how the system worked and how they could secure better terms in the future.

Good stuff LF. Going forward I think (I hope) folks will start doing more research before shelling out their hard-earned money to commissioned salespeople.

Just like when info was revealed about how stockbrokers, insurance salesmen and car dealers applied their financial engineering techniques in dealing with their customers...we are just starting to see more information coming out <too late for many, I might add> to assist homebuyers in dealing with brokers and banks.

 

[Little Fish]

Mango:

It appears you are unable to quit. I can only assume the reason why you are so defensive is because you do not want consumers to understand the system, so you can go about playing them for suckers. Business as usual...

Have a great day!

Little Fish

 

[Diane4145]

LF, you are very, welcome! No need for my contribution here, you do enough, for ALL of us!Carry on.....

Diane:

I just want to take the time to Thank You for all of your invaluable contributions to this board.

Little Fish