Archive for June, 2007
Indecent Disclosure, Yield Spread Premium Class Action Lawsuits on the Rise
June 26th, 2007 Categories: Mortgage News, Tranparent mortgage pricing, ratespeed
Matt Carter at Inman news reported today about the litigious fever spreading through the mortgage industry.
Novastar Home Mortgage seems to have hit the trifecta: Part of a $46M judgment slapped on them as a participant in the Bankrate.com unlawful restraint of trade lawsuit filed by American Interbanc, a class action lawsuit brought by it’s investors for not disclosing regulatory issues, and another class action suit for improper disclosure of Yield Spread Premiums to borrowers in Washington State. Anyone who read my last article and wanted to know more about specific TILA violations that can lead to mortgage rescision, look no further right here. It’s a white hot topic and lawyers love to play pile on…
A Novastar representative maintained they ‘appropriately disclosed YSP’s and that borrowers did not suffer any actual damages’. Huh? What part of selling a consumer a higher interest rate or charging more in closing costs than what was disclosed, is not damaging? The mortgage industry needs an enema…it’s run by fools who think they’re above the law and don’t know when to shut up. Pavlov’s canines learned quicker.
When will the light bulb turn on within this industry’s collectively dense head about disclosure issues?
It’s an industry that also has serious multiple personality issues. Everyone sells the same products yet you have different rules of engagement for the resellers. Brokers must disclose everything (but don’t), Bankers don’t have to disclose as much as Brokers, and Banks can pretty much keep it all on the inside…
It wreaks of greasy handed lobbyist poisoned politics.
As far as disclosing YSP’s, I have the solution:
Put a bright orange, legal sized page between the GFE and TILA that says ‘Yield Spread Premium’ with a line for the dollar figure underneath it. Underneath the dollar figure state: “Use The Above Amount to Apply Towards Closing Costs”. There, it’s disclosed, right out there for everyone to see…write it in large braille font for the blind to read as well. No way to get around talking about it this way…
It should meet RESPA disclosure requirements and shouldn’t require an assessment by Ivy League educated pundits to discover if the new document is clear to the consumer, i.e. show the consumer the document and ask them how much money in Yield Spread Premiums were disclosed. If they don’t answer correctly, promptly let them know they no longer qualify for a mortgage and call the No Child Left Behind organization.
The sad part is, those originating mortgages are usually not much more savvy than the consumers they serve, which is why the lending industry makes it easy for it’s resellers to tell how much in YSP is being charged. A mortgage rate pricing sheet typically looks something like this:
| Loan Amount | |||
| $300,000.00 | Rate | Rebate | Payment |
| Par | 6.000% | 0.000% | $1,789.65 |
| 6.125% | 0.250% | $1,822.83 | |
| 6.250% | 0.625% | $1,847.15 | |
| 6.375% | 1.125% | $1,871.61 | |
OK, this is where the big math happens, so grab a calculator: Multiply the % in the rebate column by the Loan Amount, i.e. .625% x 300,000 = $1875.00
Ideally, a mortgage professional would simply show the consumer this chart and let them choose which rate they wanted…But they don’t.
Ideally, some ‘visonary’ would provide consumers and mortgage professionals a little tool that automatically did this to benefit and protect both parties. Although I’m still partial to the bright orange piece of paper…
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New Mortgage Disclosure Documents Proposed by FTC
June 23rd, 2007 Categories: Mortgage News
FTC study finds mortgage disclosure forms confusing.
Master of the not so obvious…
I need to be a little more conscious of what I consider the ‘duh’ factor in the mortgage news. My initial pass was "Really now…It took a government study of 800+ consumers and a 282 page report to ‘discover’ this? Then I read the "Examples of Respondent Comments on Selected Issues" in the documents appendix, starting on page 195 (in Acrobat Reader), things went from duh to disturbing.
Reading how the test pool interpreted the current Truth in Lending Act and Good Faith Estimate documents demonstrated unequivocally that the mortgage IQ of the status quo is staggeringly low…which has laid fertile ground for potential deception and misinformation by the mortgage professional for over 30 years now. Moral responsibility doesn’t run high in this industry… Read the rest of this entry »
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Pay to Raise Your FICO Score
June 22nd, 2007 Categories: Mortgage News
Instantcreditbuilders.com, or ICB, arranges for potential mortgage borrowers to be added as an authorized user on existing creditors open credit lines for short periods of time, just enough time to raise their FICO scores enough to qualify for a mortgage they wouldn’t have otherwise. Read the rest of this entry »
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Lyrix That Won’t Leave My Head
June 20th, 2007 Categories: Random
WARNING…This post contains profanity. It has nothing to do with mortgage, real estate, or technology. Its simply how I feel…me expressing myself…and it feels good.
Yes, I feel emphatic about not being static
And not buying philosophies that are sold to me, at a steal
Just when you thought it was safe to think
In comes mental piracy…
What I’m looking for cannot be sold to me
I wish they all would stop trying
Cause’ what I want and what I need
Is and will always be free
If I hadn’t made me
I would’ve been made somehow
If I hadn’t assembled myself
I’d have fallen apart by now
If I hadn’t made me
I’d be more inclined to bow
Powers that be would have swallowed me up
But that’s more than I can allow
If you let them make you
They’ll make you paper-mache
At a distance you’re strong
Until the wind comes
Then you crumble and blow away
If you let them fuck you
There will be no foreplay
But rest assured
They’ll screw you complete
Til’ your ass is blue and grey
You should make amends with you
If only for better health
But if you really want to live
Why not try and Make Yourself…
Proper credit to Brandon, Mike, Ben, Chris, and Jose…Incubus.
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The XMan Surfs Inman News and Blog
June 19th, 2007 Categories: Mortgage News, Real Estate News
The Inman News site and blog are chock full of good information, especially since they picked up some new talent (Joel Burslem) and added other sage contributors like the REBlogChick, Pat Kitano, and the two hardest working guys in the Blogosphere, Joe and Rudy of Sellsius.
Ying-Yang Posts.
Brad (Inman) penned two posts: Glass Half Empty and Glass Half Full. Although I wasn’t mentioned in the Capital, Brains, or Passion subsections of the Glass Half Full post, I’m an optimist…He just must not know that I’m a sponsor at Real Estate Connect in San Francisco yet, which certainly takes capital, brains, and passion 
Master of the not so obvious…
FTC study finds mortgage disclosure forms confusing.
I need to be a little more conscious of what I consider the ‘duh’ factor in some news.
My initial pass was "Really now…It took a government study of 800+ consumers and a 282 page report to ‘discover’ this? Then I read the "Examples of Respondent Comments on Selected Issues" in the documents appendix, starting on page 195 (in Acrobat Reader), things went from duh to disturbing.
Reading how the test pool interpreted the current Truth in Lending Act and Good Faith Estimate documents demonstrated unequivocally that mortgage IQ of the test pool (and probably the status quo) is staggeringly low…which has laid fertile ground for potential deception and misinformation by the mortgage professional for over 30 years now. Moral responsibility doesn’t run high in this industry…
The report goes on to suggest ‘Prototype’ disclosures (page 257). Given the current TILA and GFE documents and then shown the prototype (or vice-versa), it’s no surprise the consumer pool was enlightened by the prototype. They are easier to read, because they actually do read, with words, so there’s less room for a mortgage professional to glaze over and/or dance around the hard numbers. However, the new documents still fall short in the quest for greater disclosure and consumer acumen:
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The ‘Settlement Service Package section’ needs to be broken down into line item detail.
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How taxes and insurance are determined (Reserves Deposited with Lender) needs more explanation/clarification.
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Any and all Yield Spread Premium needs to be disclosed, with no consideration if the originating professional is a broker or a banker.
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All examples used a 30 Year Fixed product, except one, a ‘10 Year Balloon’. No Adjustable Rate Mortgages were addressed. (The report does mention an intent to produce addendums for ARM’s and ‘exotic’ programs.)
Improved disclosure methods are a step in the right direction, but it’ll probably be years before these prototypes or versions thereof actually make their way into an updated RESPA…Thick bureaucratic red duct tape will see to that. Ironically, these proposed changes are advertised as measures to educate and thus protect the consumer…which is the same as saying they’re created to disarm the mortgage professional.
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