. to screw over their customers. I saw a reference to this somewhere else and got a little sick when I read it. Hate to have to call a Harvard professor an idiot but this idiot just strings together a bunch of unrelated issues to come up with a hack hit job. Anyone with half a brain knows yield spread isn't the only reason people got directed into 2/28s. If someone qualified for a prime a officer could generally make more yield spread on that or on an FHA than on a 2/28. Any mortgage broker that pushed a client who qualifies for a 6.5% rate into a 9.5% as Elizabeth Warren says would have made less money than if they put them into a lower rate with the prime or FHA. Most (not saying all) of the people who got directed into were sent there because of credit or documentation issues which would have kept them out of the prime market anyway. There's a whole different argument about whether those should have been offered or not in the first place given the default rates and hindsight bias but her article doesn't even address that. (Great article about hindsight bias from an economist here: )No one in the media ever seems to grasp the difference between and retail. They think because a offers a certain rate that is the rate the customer "deserves". Yet no one is publishing these hack articles about why convenience stores charge more for milk than they paid for it or Wal-Mart or Kroger does the same. Or about the horror of how people are overpaying for cars because they can't buy them for the same price the dealer pays. On those items everybody expects the buyer to shop around or settle for the higher price if they don't. No one says they were "ripped off" by the convenience store. They just paid a higher price for not going down the street to Sam's Club or Costco. Everyone tries to make the issue of the cost of a more complicated than it is. If someone gets a quote from one they know the rate and the costs and then they can call the next one on their list and get the rate and the costs and then the next one. It doesn't make a whit of difference how much yield spread any one of the is getting. It isn't part of the borrower's comparison. Any who is overcharging will have a higher rate and/or higher costs.
I agree assassin17!!! But where is the NAMB? This is getting ridiculous now. I mean really what do we pay them for? The lies and propoganda that are being spread is just down right unbelieveable at this point! Can this lady be any further from the truth? My god she just skewers the entire broker side with what seems to be only opinion and no facts at all. How are we to survive when these idiots continue to spew this garbage. Yet we as brokers have no positive press and our main lobbyist group hides under a rock. I have built my entire business on providing the best possible advice and loan programs for my clients and because of that i am supposed to work for free!!!! I'm sure she doesn't work for free and neither will I. She obviously did no research for this article and it shows based upon her assumptions and lack of knowledge as to how the system truly works. God its this type of press that makes me fit to be tied!!!!! Well since I deal with morons day in and day out whats one more at this point.
Medical costs are out of control not to mention drug and insurance costs. When you lobby with muti-millions of dollars every year the government tends to leaves you alone. Just like real estate agents are one of the top lobbyists and are never brought up for stearing people to larger and more expensive homes for a larger pay check. Then they seem to be able to be paid 1099 without question?
Jesus is someone going to inform these freakin nutsacks how this stuff really works (NAMB cough!) or are we going to continue to just be bashed! Why is no one bringing up that our rates with YSP is still better than most retail banks! With thier SRP! Oh but banks are allowed to be profitable! we are not! I found a link for this Harvard dumbass http://www law harvard edu/faculty/directory/facdir php?id=82And yes. I did say Harvard Dumbass
Unfortunately. Ms. Warren has been developing a following. Rumor has it her classes are for advanced degrees and often with a waiting list to get into one of her classes. It would take very little effort for someone to promote her as the highly educated Suzi Ormann and do it successfully. I am not a member of NAMB but you guys are definitely getting the short end of the stick. Where are they? From their national website:"The National Association of Mortgage Brokers is the voice of the mortgage broker industry with more than 25,000 members in all 50 states and the District of Columbia. NAMB provides education certification and government affairs representation for the mortgage broker industry which originates over 50% of all residential loans in the United States."What are the dues? If my math is correct a lobbyist or well known spokesman could certainly be in the budget. No instead the NAMB is sending legislators letters... did they even send members copies? This letter seem wimpy so low key almost as saying. "yes we agree we and these issues are the problems and this will make it all better." http://www namb org/Images/namb/GovernmentAffairs/Comment_Letters/Comments%20on%20Subprime%20Lending%20Statement%20(Final,%20May%207,%202007) pdfI am the first to acknowledge that I am not a member and shouldn't *itch. If I were a member. I would be at the NAMB West conference November 2 -6 asking where membership dollars are being spent. I can tell you the NAMB headquarters is in the top ten of the most expensive pieces of real estate in the Metro DC area. Something isn't adding up.. kind of like the United Way's math years back. (The top dogs were living quite the lifestyle on the backs of contributors). When is someone going to stand up and say it's the consumers and their demands that created their own mess. I talked to a woman yesterday.... same tune everyone is hearing. Maybe $1 equity right now payment $4300. (she admits she used equity for the pool the remodel you name it). Her credit cards are now maxed out (60K+). My new and favorite question now is. "tell me what payment would you consider comfortable right now?" Her response was $2800. When asked where her payment started it was $3500. Hello? Why did she take a payment so much more than her comfort level? Silly rabbit.
I read the article through a Google feed on my blog yesterday and was so bent out of shape I was trying to find a way to email her but I then figured what would be the point?The problem we have is that people who know nothing about the industry are continously speaking and writing about the industry. From my understanding NAMB has a few things in the works. I will be a member of NYAMB this month and have volunteered for at least 3 committees.
Actually I would. There's nothing inherently bad about a 2/28. There are many different factors that determine whether a loan program is right for someone. I don't do subprime loans myself but right now I am in the process of refinancing several borrowers who got into their homes on a 2/28. Based on what I see they couldn't have qualified for anything else credit wise except a fixed rate subprime loan and the rate on that would have been too high. Now they are homeowners with equity and are about to close on 30 year low fixed rate loans. It was right for them because or their credit and the area they are in has stable values. Whoever put these people in these 2/28s did something good for them.
Ok now I'm mad. I don't mind being a bad guy. BUT get the facts straight. Who in their right mind is gonna tell a borrower the best I can get you is 9.5% what will the borrower do? They'll laugh in your face and goto the guy down the street. What we need to do is have our own website open to the public so they can see what we do so they can understand how we work. A website where we can debunk half of the bull**** the media congress and everyone else thinks is a truth. I want a website where they can understand how we make our money not slam realtors,lenders appraisers and title companies but a place to show we are united for the help to the borrower not destroy them. I don't want fanfare just somewhere we can offset some of the damage. Obviously. NAMB won't stick their necks out for the industry. And obviously noone else will unless they want to get grilled. Let the buck end with us and show what we do is positive not negative. Maybe it's stupid now that I'm calming down. It's worth a shot.
Who said 2/28s are "so good". I said the right program depends on the situation. Two years ago the difference was as much as 1.5 points sometimes between fixed rates and 2/28s for loans. I had some old rate sheets stored on my computer and checked just to make sure my memory was correct. For a borrower in a stable area with a good plan to keep their credit in line this would have saved them thousands of dollars. It isn't right for everyone. Some people are incapable of managing their credit others have bad credit because of something that happened to them. It isn't the program that is evil. It is when the match is wrong between the program and the borrower. Now on to what is the cause of the all the foreclosures. In short it ain't all the 2/28s. You're falling for the same crap that all the media fall for. Sure some people with 2/28s are in trouble. But at the same time the brunt of massive levels of fraud combined with massive job losses in some parts of the country is hitting the market. In Georgia for instance we are having record foreclosures. We also happened to lead the nation in fraud for many years. At least 40% and maybe as much as 60% of the foreclosures are "flipped" properties and non-owner occupied properties. The foreclosures are highly concentrated in areas where this activity was going on. The on these properties range from full doc FNMA and FHLMC conventional fixed rates to 2/28 with 3 year prepays. The problem is deeper and more complicated than 2/28s. I think we will find that fraud - both in actual made up paystubs and w2s etc and in overstated incomes on low doc is way above 2/28s in creating the problem.
Originally posted by gsealPeople don't qaulify for only 2/28's. If 2/28's are so good then why are they responsible for record folclosures and the colapse of the sub-prime market. The differnce for me has always been.4-.6 to the rate for fixed. I love it when I'm talking to a borrower who has a LO that is only offering them a 2/28 because I know I'm going to end up doing that loan
Just sent a feedback email to the newspaper. I wish I would have cut and pasted here. I requested a response. If I get one. I'll post it. I'm apalled. A law professor with no finance experience writing in a major publication??!!! My Mom is a Radiologist but she'll never write an article on how to perform surgey. Just because you have a degree in higher education doesn't mean you know everything. It's a shame Ms. Warren doesn't understand this....
Originally posted by scramseyJust sent a feedback email to the newspaper. I wish I would have cut and pasted here. I requested a response. If I get one. I'll post it. I'm apalled. A law professor with no finance experience writing in a major publication??!!! My Mom is a Radiologist but she'll never write an article on how to perform surgey. Just because you have a degree in higher education doesn't mean you know everything. It's a shame Ms. Warren doesn't understand this....
Here's the author's contact information in case anyone wants to call her and tell her what an idiot she is. The phone number rings straight to her office:Elizabeth WarrenLeo Gottlieb Professor of Law Office:Hauser 200Assistant:Carol Bateson 617/496-2024Phone:(617) 495-3101Fax:(617) 496-6118Email:cbateson@law harvard edu Below are her research and subject areas of interest and education:Research Interests•Empirical and Policy Work in Bankruptcy and Commercial Law •Financially Distressed Companies •Women the Elderly and the Working Poor in Bankruptcy Subject Areas for Supervising Written Work•Bankruptcy •Commercial Law •Contracts •Empirical Studies of Legal Systems Subject Areas for Accepting Press Inquiries•Bankruptcy •Business Failure •Business/Corporations •Consumer Debt •Contracts •Corporate Reorganization •Divorce and Bankruptcy •Environmental Law and Bankruptcy •Families in Bankruptcy for Medical Reasons •Health Care Economics •International Bankruptcy •Mass Torts and Bankruptcy •Medical Debt and Bankruptcy •Small Business Failure •Transnational Insolvencies Education•University of Houston B. S. 1970 •Rutgers University J. D. 1976
here was my email response to Ms. Warren's article although the email address it forward to has a different name. Ms. Warren,I am sure an educated individual would not have made the fraudulent claims and false accusations contained in your article if they had an understanding of the subject matter so I would like to take two minutes to educate you on the process and compensation. As a or a officer working for a broker. I am compensated one of two ways. I can be compensated by the borrower paying an origination fee expressed as a percentage point of the amount or points in exchange for the lowest rate offered by the on that particular day for someone who meets the qualification criteria for that mortgage. I can also be compensated directly by the to reduce the prepaid interest by offering a rate marginally above the daily rate all other things being equal. Since the marginally higher interest rate will yield more profit to the bank this compensation to the is a premium paid to reflect the yield spread increase or yield spread premium. It is up to the borrower to select which option best fits their needs; higher upfront cost in exchange for a lower long term rate or lower/no upfront cost in exchange for a higher rate in the long run. The claims you made in your article seemed to indicate that a would be induced to offer a completely different product when a more attractive product was available and the borrower qualified for that loan. Your article stated that this bribe was the yield spread premium which is factually incorrect. Although I agree there should be reforms within the industry your factual inaccuracies false statements and misleading information does not help to address or correct the problems we are facing today.
Here is my e-mail to this woman. I have just finished reading your October 2nd. 2007 article wherein you allege that brokers are ‘bribed’ by to place borrowers into with rates higher than they would otherwise qualify for. I am shocked that a law professor a Harvard Law professor would write such an article. You clearly have not done any research on this know nothing of lending and assume that professionals should work for free. Do you know what the job description of a mortgage broker is? Do you know what we are responsible for during the process? Do you know the difference between a ‘retail’ par rate and a ‘par’ rate? You should be ashamed of yourself for writing such a baseless sensationalist article.
Funny how that media cant wrap there heads around brokers and bankers. From Article in the Washington PostMortgage Lender Settles LawsuitAmeriquest Will Pay $325 Millionhttp://tinyurl com/e2d68By Kirstin DowneyWashington Post Staff WriterTuesday. January 24. 2006; Page D01State prosecutors and lending regulators in 49 states and the District have reached a wide-ranging $325 million settlement with
the nation's largest to home-loan borrowers with poor credit to resolve allegations that the company defrauded and misled consumers. It is the second-largest consumer protection settlement in U. S history following the $484 million
Targeted over Charges of Predatory Lendingby Brendan Coyne Dec. 15. 2005http://newstandardnews net/content/index cfm/items/2679Groups alleging that one of the nation’s wealthiest financial firms engages in discriminatory lending practices staged a picket at the company’s headquarters yesterday. The groups are in a long-running campaign to force the firm to admit to and provide compensation for what critics term "predatory" lending. The protest at Wells Fargo’s San Francisco offices garnered little media attention but organizers considered it an important step toward wringing economic equity from the banking giant and... Look at the warm fuzzies on the
http://www consumeraffairs com/finance/wa_mutual_mort htmland... Predatory lending: There ought to be a lawExorbitant interest schemes bilk the poor and the old By Carlos Watson CNN Friday. August 19. 2005; Posted: 1:15 p m. EDT (17:15 GMT) http://www cnn com/2005/POLITICS/08/19/predatory lending/index htmlAnd significantly it is not just corner shops in low-income neighborhoods that specialize in this practice. Indeed. New York Attorney General Eliot Spitzer recently announced that he is investigating some of the biggest names in global banking -- including
I've been calling past clients to check on their current needs and found one borrower who opted for a COFI loan. He was quite happy with it; it was working well for him UNTIL he read a few articles about designer loans being the sole reason for the mortgage implode and decided that the COFI loan he had was one of those designer loans that ruined our economy. He refinanced immediately with someone else & proceeded to scream at me blaming me blaming my company etc etc (even though he admitted earlier he was happy with the loan) cursed me with such vehemence as I have never heard before and then slammed the phone down on me. What the *^%($^$&???This is how uninformed and irresposible media is affecting us. Disgusting.
Actually the professor is both right and wrong and is drastically behind the times. This was a hot issue before 2000 when the Senate Banking Committee and other watch dog groups were trying to figure out just exactly what purpose Yield Spread premium served. Part of the problem is that there really was a lot of abuse of the YSP utility by unscrupulous brokers who used it to pad profits. Most brokers know that the YSP is a tool to be used to reduce origination points to the borrower allowing the borrower to finance points that would ordinarily be charged up front. The cost of this service is an adjustment to the interest rate. A broker has to make a profit and should reasonably make about 3% of an average loan to stay in a profitable business. If the borrower only has 1 point up front the broker has to get the other 2% via YSP or there is no profit and the whole exercise becomes pointless. What this lady is pointing out is that there are brokers (in the minority) that will charge 2 or 3 origination points up front and then add another 3 points using YSP. The truth is that no lender in its right mind if I can phrase it that way is going to let the broker get away with it for fear of excess scrutiny by the watchdogs. This lady is just a day late and a dollar short on the subject matter.
So how are we 'bribed'? When IndyMac will pay me 0.5% for a loan and Suntrust will pay me 0.75% for the exact same loan and I decide to take it to Suntrust.... Suntrust is bribing me to go to them? Is that the same as when US jobs are moved overseas for cheaper labor; are these companies being 'bribed' by the cheaper labor?This woman needs a slap and quite a few strongly written letters!
Thank you for that. I thought I was the only one. It was a useful tool until the lenders decided to change the rules and the game completely half way through. The lenders banks and investors are the ones ultimately responsible? How do you decide to one minute open up the flood gates and then the next decide there's a drought. What I mean is they went from giving people 2/3 and 5 year fixed loans. Stated Income with a.001 fico and we'll give you a loan to buy the home of your dreams. Now they simply say jokes on you we're on vacation living it up screw all of you that made us rich?!
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