FHA Mortgage Expert - Tri-State Area - New Jersey/PA/Delaware

What is the uproar in regards to yield spread premium (YSP) that is paid to brokers by offering higher rates. The politicians that don't know how YSP's can help the consumer and not hurt them.  I am not here to debate politics and what is right and wrong, but to give the true understanding what YSP is used for and how it can help the borrower when purchasing or refinancing a home.

Yield Spread Premium known as YSP is defined by wikipedia as the cash rebate paid to a mortgage broker based on selling an interest rate above the wholesale par rate that the borrower qualifies for.

It just becomes wasted time in my opinion, when a loan officer has to defend the reasoning behind how they make money. When the consumer can assume that the loan officer makes more money, that's if they see the YSP on the good faith estimate or on the HUD settlement sheet. It becomes worse when that consumer now shops for his or her mortgage by trying to compare YSP's. This method in my opinion is ludicrous and just plain retarded.  By disclosing the YSP just confuses the mortgage process.

Question : Would you select a doctor or a criminal lawyer by what they charge?  How does the disclosure of the loan officer's profits affect the price that the consumer would pay for that loan?  Very simple, by knowing the profit, the consumer is able to negotiate better.

What's been the hottest topic of lately? That it's unfair that the broker has to disclose the YSP. What gets me is that you just don't see it on the bankers side. Which could lead you to believe that mortgage bankers are cheaper. A lot of the hype is that many brokers don't disclose YSP on their inital good faith estimate, even though they have to by law. And then it's later seen on the closing settlement statement. This is where the client becomes angry and figures that the loan officer is trying to get over on them. What would solve the problem?  Just allow the broker not to disclose the YSP.  But congress wants to eliminate the YSP on the brokers side.  This could make it more expensive  for the borrower.

 Let's take a peak, comparing 2 different lenders, not making a difference if it's a banker or a broker. Example : LENDER A :  If their rate was 5.75% and they were charging 1 pt with $500 in fees. The YSP was 1 pt on the back. LENDER B : Their rate is 5.625% and were charging 1 pt with $500 in fees.  But the YSP was 1 1/2 pts on the back.  Who has the better deal?  LENDER B has the best deal for the client. So what if they made more money.  Unless we put an exact fee per loan to be made there is no transparency.  I truly feel that if you get the loan officer to reduce their fees tremendously, that it would seriously affect your service that you would receive.

Conclusion : Katie Marchione said in a comment in another post, "When you buy a $50 shirt at Macy's, don't you think that there is profit built into that price?  You are paying for a product or for a service and the providers deserve to get paid for it."

I admit, that there are loan officers that take advantage of the consumer. But there are many borrowers out there that don't have the money for all of the closing costs. And the lender can use the YSP to also pay for certain fees. And if the yield spread premium is taken away from the broker, borrowers will end up paying for more in closing costs because the lender needs to make a profit.

Overall, when shopping a rate or mortgage?  The consumer needs to look at the rate, the fees in lines 800 to 813 on the good faith estimate, and to compare the same mortgage program. You can't shop accurately by looking at the APR or the YSP.  This is just my opinion of 15 1/2 years in the mortgage industry.

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For more information on FHA loans, please go to this link. The FHA Expert

For more information on how you can obtain your dream home, please click here : Mortgage Financing Options

For important mortgage insight to watch for, please read : Consumers need to be aware of these Red Flags !!!!!

 
Copyright © 2008  by Jeff Belonger

Project Lifeline, what does it all mean??   The Bush administration just announced Project Lifeline on Tuesday the 12th, 2008. This new plan is suppose to be an extension of the previous plans to help homeowners who are having difficulty in keeping up with their payments. The previous plans had strict guidelines to where you basically couldn't be late on your mortgage prior to the rate adjustment on your adjustable rate loan. 

President Floyd Robinson of Insurance Services Group said, "We want homeowners facing foreclosure to take the urgently required first step and reach out to their servicer, or housing counselor, and get started on a recovery plan. Project Lifeline represents a broad, national approach to looking at each homeowner's situation individually - making sure that we stop the clock on foreclosure long enough to complete the loan modification process in those cases where it's possible to do so."

So, what will Project Lifeline actually do for you?  In conjunction with 6 major lenders and about 27 servicing companies, these lenders will tack on an extra 30 days onto the grace period delinquent borrowers have to get up to date on their mortgages before foreclosure proceedings are started. But they are also adding the 30 days while the bank evaluates whether they're eligible to modify their loan on better terms.

Are you confused now?  Feeling upside down? How about both....?  I am and I will explain why. I have been in the mortgage industry for 15 1/2 years now and just when I thought I have seen it all. Again, I know we are in an election year. I know that we all want to help these borrowers. But if the homeowner couldn't make their payments for 3 to 4 months, how do you think that they will be able to come up with these payments in one more month.  There is more to it, but I don't want to bore you with nonsense details. To me, its common sense.

My Opinion?  --  Why don't I just get out my box of band-aids so we can prolong the death of these foreclosures.  This should be called the "band-aid plan".  Some banks Most banks in the past wouldn't take partial payments for the mortgagee once they were 2 months or more down. They would want it all.  I met with an investment group today in NYC who has a goal to help many homeowners and ask myself and my company for help. Sure, we are both in it to make a profit. But this person and her partner are also wanting to help those homeowners that are in trouble. But this will be done with the help of private money and private investors. I'll be explaining our game plan in a later blog, but this is what we need. Lenders willing to help out now, by cutting their losses now, which would possibly help more homeowners save their houses now, instead of these helpless or hapless government plans that actually won't help many at all.

PS>  this was not to sound negative by any means. But let's stop with the so-called fluff in regards to the past plans, such as the FHA Secure & the rate freeze plans. We need to forge together as ONE and really make something happen. Not this so-called chit chat. As I mentioned, I will be blogging about something that I am working on with an investment group.

Fran White has been so kind to invite me to her weekly so-called talk radio show this Friday, the 15th. When I say so-called radio show, she is the host, conducting the interview and the incoming calls. It's all done through her, her phone, and an online program. Technology has come a long way, wouldn't you say?

It will be live 1pm CST time and will be available online to listen to around 2 pm CST. You can call in to ask questions or just listen to the program live by calling 1-646-652-4765.

Part of the show, we will focus on a specific topic that Fran wrote about, should realtors pre-qualify their clients prior to showing them a home.Would YOU Show A Home To A Buyer Who Said, "I'm Not Pre-Approved, But I Want To See The House Anyway"  The rest of the interview, we will talk about FHA, FHA mortgages, and how does the real estate future look to so many.

What details will I get into, during the interview and discussion?

• The Stimulus Package that congress just approved. What does this truly mean and what I truly see happening. I will share with you common sense figures that aren't being mentioned and who this will actually help and not help.
• Briefly touch upon the FHA Secure loan, the President's rate freeze plan, and Project Lifeline that the Bush Administration announced today, February 12th, 2008.
• Where FHA is headed in 2008 and how consumers can help themselves now, not later.
• My general real estate market predictions for 2008.....to include our foreclosure crisis.
• Lastly, about the bait and switch issues that plague the mortgage industry. Please read : Mortgage Call to Action -- What do you stand for??

You can get a little more information from Fran's post : Blog Talk Radio Show Discussing FHA Mortgages    And again, please don't hesitate to read her blog and all the comments about realtors that should or shouldn't qualify their own clients. This is a must read : Would You Show A Home To A Buyer Who Said, "I'm not pre-approved by I want to see the home anyway"

Thank You and I look forward to your feedback after you have listened to the show. Please don't hesitate to come back here to share your feedback. And if you missed the show, I will be linking it right here, within this blog. Thanks.

Here is the Blog Radio Talk Show  --   FHA-Mortgages by the FHA Expert - Jeff Belonger

Okay, you truly feel that you could be in the market to purchase a home in the next year, possibly in the next 6 months, or you decided to look into it now. You feel like it shouldn't be that hard, that you have decent credit and that you can prove your income. In reality, after doing mortgages for over 15 years, it shouldn't matter what you think. With the ever changing world of mortgages, you should try to be semi prepared before jumping right into it. Especially if your credit is less than perfect.

So, what should you do?  I personally recommend that you speak to a mortgage professional no matter how long that you are away from purchasing a home. Keys to home ownership sometimes take some elbow grease and can put a stress on your loan approval if you aren't prepared ahead of time. Stop listening to those that say having your credit pulled can lower your credit scores. That's only if you do it consistently in a certain time period. It doesn't hurt to be prepared prior to even applying for a mortgage, which could save you hundreds of dollars.

Here is a basic list of items that you could start to work on :

• drivers license -- Moved to a new state just recently? You should make sure that your driver's license has your new updated home address.

• large deposits -- Try not to deposit large sums of money into your bank accounts outside the norm. Work pay is okay. Again, anything outside the norm, make sure you keep a paper trail.

• solid 2 year work history -- Make sure that you don't have large gaps of employment, unless you were sick or maternity leave. And don't quit your job during the mortgage process.

• proof of rent for at least a year -- Always pay at least by check or money order and keep the copies of these.
  

• prior collection account/charge off/or judgment -- if you are deciding to go into some sort of payment arrangement. make sure that you have at least 6 months of payments prior to signing a purchase agreement.

• Purchasing new items -- If you are serious about buying a new home, don't go buying new things, such as a new car. Especially if you are in the middle of a mortgage process, trying to get approved for a mortgage.  

Overall, you just want to be prepared and somewhat educated on the process of buying your new home prior to searching for that home. There are several reasons why. Two that stand out :

1. Just piece of mind, because once you apply for a mortgage, there won't be any surprises or delays.
2. A delay in your approval could make you miss your commitment date or if you locked into your rate at time of application, you could lose your rate.
   

The Mortgage Process Series :

• Mortgage Process - Purchase CHECKLIST prior to purchasing a home - Part 1 of 3
  

• Good Faith Estimate - Pre-Approved or Pre-Qualified -- The Mortgage Process - Part 2 of 3

• FHA or Convnetional loans -- The Mortgage Process - Part 3 of 3

Politicians are wanting to step in and squash the yield spread premium (YSP) that is paid to brokers by offering higher rates. I am not here to debate politics and what is right and wrong, but to give the true understanding what YSP is used for and how it can help the borrower when purchasing or refinancing a home.

Yield Spread Premium known as YSP is defined by wikipedia as the cash rebate paid to a mortgage broker based on selling an interest rate above the wholesale par rate that the borrower qualifies for.

It becomes a balancing act when a loan officer has to defend the reasoning behind how they make money, when the consumer can assume that the loan officer makes more money if they see the YSP on the good faith estimate or on the HUD settlement sheet. It becomes worse when that consumer now shops for his or her mortgage by trying to compare yield spread premiums. This method in my opinion is ludicrous and just plain retarded. Would you do this?

To continue this conversation, please read : what's behind Yield Spread Premiums (opens to a new blog)

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For more information on FHA loans, please go to this link. The FHA Expert

For more information on how you can obtain your dream home, please click here : Mortgage Financing Options

For important mortgage insight to watch for, please read : Consumers need to be aware of these Red Flags !!!!!

 
Copyright © 2008  by Jeff Belonger