Archive for the 'Tranparent mortgage pricing' Category
Conforming Wholesale Mortgage Rates for 6/16/08
June 16th, 2008 Categories: Mortgage News, Real Estate Technology, Tranparent mortgage pricing, Yield Spread Premiums
Originally posted on www.ratespeed.com/blog…
All subsequent daily conforming wholesale interest rate pricing posts, other schwag, definitions, etc. may be found over there…
What you see above is a screen shot from a results page generated by RateSpeed at 1:41pm on 6/15/08.
The risk based credit, financial and property criteria used to generate the above quote is as follows:
Purchase, Primary Residence, Single Family Residence, Fully Documented income, Debt to Income <39%, Loan To Value <80%, $400k Loan Amount, 700 FICO score.
Don’t believe what you see? Try it out yourself.
Shortly, RateSpeed will be enrolling 25 mortgage professionals as beta testers. Are you a mortgage professional looking to differentiate yourself in the market? Stay tuned to find out how you can be one of the early adopters in the transparent mortgage revolution.
Defining the fields and columns above:
Conf 30 Yr Fixed.
This is the term of the mortgage program. In this case the program is a traditional conforming 30 year fixed mortgage product.
Rate.
This is the interest rate of the loan.
APR, in this alpha rendition, will only account for the Broker/Banker Fee. Traditionally it will (and should) include all closing costs. IMO APR is confusing and manipulatable.
Loan Amount.Self explanatory, the dollar amount of the mortgage.
Monthly Payment.
How much you would pay the mortgage provider each month. Includes principle and interest.
Price.
This is the % cost or rebate that the given interest rate yields in the wholesale market. The Loan Amount is multiplied against the Price to equal the dollar ($) amount in cost or YSP credit.
YSP Credit.
RateSpeed is about choice and displays five levels of Price, one Price below Par (a Par rate is the lowest interest rate a borrower qualifies for, given by the wholesale lender) and four above Par. The higher Rate one chooses above Par the more YSP Credit (or cash rebate) the consumer may receive and apply toward closing costs (Broker/Banker Fee and 3rd Party fees, i.e. appraisal, title, escrow, home inspection etc). An interest rate below Par will cost a consumer to acquire, often times called ‘buying down’ an interest rate.
In the above 30 Yr Fixed, $400k Loan Amount example:
6.25% would yield $1084.00 in cash from the wholesale lender to the consumer to be applied toward closing costs.
6.625% would yield $5844.00 in cash from the wholesale lender to the consumer to be applied toward closing costs. The first $2000 would pay the Broker/Banker fee and the rest may be applied toward 3rd party closing costs (in this scenario).
Broker/Banker Fee.
This is the (negotiable) flat fee the mortgage professional is charging to close this loan. It is completely up to the mortgage professional what this fee ultimately is, RateSpeed does not mandate what a mortgage professional can charge.
$2000 is what we chose to represent as the Broker/Banker fee in this example and should not be interpreted as what all licensed mortgage professionals may charge who offer RateSpeed to their clients. The fee may be more or less, completely dependent on the mortgage professional, but always disclosed up-front.
Net Cost.
Net Cost = Broker/Banker Fee minus (plus) YSP Credit (cost).
Using the same qualifying information, compare and contrast the rates and pricing you see above to other mortgage websites and similar applications and you will quickly see the difference between a transparent mortgage professional who offers RateSpeed and those who don’t…unabated access to real time, best-case wholesale mortgage rates and pricing.RateSpeed: Enabling mortgage consumers and professionals to make smarter decisions with better information.
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Sphere: Related ContentIt’s an Anonymous, Automated, Transparent, Customizable Wholesale Mortgage Program and Interest Rate Pricing Pre-Qualification Search Engine, Dummy!
June 10th, 2008 Categories: Mortgage News, Tranparent mortgage pricing, ratespeed
‘It’s been a long, strange trip… ‘
- Jerry Garcia
The XBroker blog was started in August of 2006 with this little project in mind.
Part 1: www.ratespeed.com is live…I hope you enjoy the presentation
Part 2:
The Blog will launch over the next 48 hours.Launched.Part 3:
The RateSpeed application will launch by FridayLaunched.
Expounding on the worlds longest title…
Anonymous. Consumers only provide property, financial and credit risk information typically used to determine what mortgage rates and programs are available for a given scenario. This is called ‘risk-based pricing’. RateSpeed does not collect names, addresses, social security numbers, phone numbers or other personal information that may end up in the wrong hands or abused by sales marketers.
Automated. The RateSpeed application is custom configured to simultaneously ‘shop’ every wholesale lender a mortgage professional is individually affiliated with in real time. What used to take a mortgage professional many hours, even days to complete and return to a consumer can now be done in seconds.
Transparent. Users of RateSpeed get to see exactly what they qualify for. Mortgage professionals have no ability to manipulate the information flow between the wholesale lenders database and the consumer, insuring consumers get to see exactly what they qualify for, including every dollar of Yield Spread Premium (the cash rebate a wholesale lender offers the consumer for accepting a higher interest rate than they qualify for.)
Customizable. Unlike other mortgage pre-qualification web-sites and similar applications, RateSpeed is 100% customized to an individual mortgage professionals current stable of wholesale lender relationships. The rates, pricing and programs that RateSpeed displays are the exact same as the mortgage professional would personally quote in person or over the phone.
Wholesale Mortgage Programs. Wholesale mortgage rates, pricing and programs are only available through a licensed mortgage professional. The rates and programs widely advertised on TV and the Internet are retail and often contain hidden and/or inflated costs. RateSpeed allows consumers to see their wholesale rates without middle man manipulation.
Expect to see other news and major announcements shortly, stay tuned…
RateSpeed, The Transparent Mortgage Search Engine…
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Sphere: Related ContentZillow Mortgage Marketplace, Cultivating a Better Crop
May 21st, 2008 Categories: Mortgage News, Tranparent mortgage pricing, zillow
Since launching last month, Zillow’s Mortgage Marketplace has grown quite respectably. They’re already adding features as a result of listening to members of their community.
According to Nate Moch from the Zillow Blog:
Since launching Zillow Mortgage Marketplace a little over a month ago, we’ve received all sorts of recommendations and feedback from our users. We have been busy fixing a few things since then, but we’ve also recently added features the our lender community has asked for. We appreciate the great suggestions we’ve received and hope the new offerings we added will be useful tools for the 2,000+ lenders in the marketplace.
The improvements: a Quote Pre-fill, Loan Quote Flags, and Lender Leaderboard attempt to address some of the inefficiencies within the community, specifically the latency and accuracy of information from participating lenders and consumers.
Quote Pre-fill reduces redundant data entry for the mortgage professional making the act of filling multiple, similar consumer quote requests more efficient.
Loan Quote Flags allows the professional community to police itself from traditional mortgage gamesmanship by reporting obvious grievous actions.
Lender Leaderboard ranks professionals by the number and quality of reviews they’ve received.
The big Z has also begun to offer some nice intuitive calculators…
All in all, a positive direction for the community, though probably still not enough to increase the viability of the Marketplace to a point of an acceptable client pull through rate ratio, for the upper end professionals.
Zillow still has to markedly improve on a couple areas before they become a viable community for anonymous, transparent lending a.k.a. Mortgage 2.0:
Decreasing and normalizing the latency in information exchange between the consumer and professional. ‘Vanilla quotes’ come back within an hour, but quote requests that deviate from the conforming norm take substantially longer or go unaddressed. Both time frames are far from ideal.
‘Accurately and efficiently quoting a myriad a loan scenarios’ is an oxymoron. With the market changing daily as far as product availability, a professional who’s not diligent in their research may misquote unintentionally and get flagged even though they were genuine in their actions.
Zillow is still completely beholden to their professional community to provide the most critical information, rate and price, in a truly transparent fashion.
IMHO the big Z is addressing this dynamic one step too late in the infochain-link:
Wholesale Market-Professional-Zillow-Consumer
Ideally:
Wholesale Market-Zillow-Professional-Consumer
would be far more effective, alas far more difficult to pull off…
Today Zillow is still closer to Bankrate 2.0 than Mortgage 2.0 (I’m throwing 2.0’s around here) but they’re trying hard and getting better, taking continued important steps to ultimately getting it right…
Sphere: Related ContentThe Economic Realities of Transparency for The Mortgage Brood
April 20th, 2008 Categories: Business Models, Mortgage Boom 2.0, Mortgage News, Tranparent mortgage pricing
Transparency in the mortgage industry has become a hotly debated topic over the past 18 months. With major corrections in the marketplace, declining home values, volatility in mortgage securities, and a white hot media focus on the viability of mortgage professionals in general, we are primed for the paradigm shift towards the type of market transparency that has taken over the economics of other commodity markets.
Searching Wikipedia, Transparency has no less than 17 definitions; focusing on the ‘Economics’ classification:
“In economics, a market is transparent if much is known by many about:
- What products, services or capital assets are available.
- What price.
- Where.
A high degree of market transparency can result in disintermediation due to the buyer’s increased knowledge of supply pricing.
Transparency is important since it is one of the theoretical conditions required for a free market to be efficient.”
I was going to delve into it’s philosophical definition and application, but that would cause too many peoples heads hitting their keyboard out of boredom.
‘Web 2.0′ is all about augmenting the speed and lucidity of delivering #’s 1-3. The very expensive technologies that ‘disintermediated’ traditional commodity brokers on Wall Street are now readily available at far less cost to most any industry that deals in information, this much we know. I can today, while being out of the industry as a practicing mortgage broker, monitor what’s going on in the industry better than I could when I was in the day to day grind. Much of the valuable information that was available in ‘expensive’ short supply just 2 years ago is now readily available in buckets.
To a great degree, the resourcefulness of the trusted crowd in the re.net space allows me to maintain a keen perspective about the industry in a fraction of the time. Any consumer who reads the mortgage websites indexed under my re.net tab could assimilate 90% of the knowledge they need to select a mortgage product that is fit for their personal situation.
It makes me smile when I read affluent bloggers post about how valuable their advice is as they simultaneously give it away. Here’s six figures worth of advice, for free. I’ll even expound on Roberts advice:
Next time you take out a mortgage, commit yourself to making the payment a 30 year fixed amortizing loan yields (20 or 15 year fixed payments are even better if you can afford it) that your situation qualifies you for. Execute a 5 year ARM Interest Only (or ‘cheaper’) product, take the difference between your ‘qualifying payment’ and your actual payment, and invest it.
Thats valuable counsel, now its out there for free…I just disintermediated myself
The mortgage industry, with it’s migration into the Mortgage Backed Securities arena of Wall Street, is square in the same cross hairs that pre dot bomb ’stock brokerages’ found themselves. The environment is strikingly similar: market has recessed substantially, quality information is getting easier and cheaper to find, and its ‘brokers’ are fighting for their careers.
Remember when stock brokers repeatedly uttered how ‘people need my advice’ to choose the right investment vehicle? If someone would have told them then that they would be selling mortgages (or real estate) in the near future, they’d have laughed so hard at you they’d cry. Speculative investment vehicles are far more difficult to evaluate risk in compared to a mortgage, yet I hear many of todays current mortgage practitioners repeating the same ‘people need my advice!’ jargon. Mark Twain said, ‘History may not repeat itself, but it does rhyme’…this is straight-up Nursery style.
Brokering information inherently gets easier, faster and cheaper. If you’re in the mortgage business and you can’t deliver more information to consumers easier, faster and ideally cheaper than your competition, your value is diminishing. The quicker a mortgage (and real estate) professional learns to become an uber resourceful information broker, the more ‘future proof’ you and your business becomes. Banks have already clued into this, they’re positioning themselves to crush the small to mid size shops, continuing to keep Washington in their pockets by lining it’s pockets, to keep the unscientific disclosure laws in place.
How does one compete in an industry that has disparate transparency/disclosure rules? Get lean, efficient and be more transparent than the next guy. It’s always been about survival of the fittest, today is no exception…you must offer more information, be quicker, better and cheaper than your competition.
Mortgage professionals had best stop trying to refine their image on the outside and instead get real personal with how they do business internally, or it’s on to yet another career…
Sphere: Related ContentMortgage Yield Spread Premiums and The Transparency Thing
April 15th, 2008 Categories: Real Estate Technology, Real estate economics, Tranparent mortgage pricing, Yield Spread Premiums, ratespeed
Yield Spread Premium: A consumer option to finance some or all of closing costs by accepting a higher interest rate than they otherwise qualify for.
There has been much debate about Yield Spread Premiums (YSP’s), from overall required disclosure policies to their potential abolition. All mortgage professionals have a personal opinion on the topic, some resort to denial when it comes to their relative importance in relation to the overall mortgage transaction, others will get down right hostile regarding the topic of proper YSP disclosure and use.
Regardless of status-quo industry opinion, YSP disclosure is a vital component to address amidst the mortgage mess we’re in. Many other industry pundits have writtten about YSP’s, opinions vary as widely as the colors of the rainbow, most of the articles I’ve read were written after this article was posted on the Active Rain real estate social network. The post pales in comparison to the comment thread, which is most entertaining. The same article is linked internally (below) as well…
I started writing about YSP’s in early 2006, even before this site became a ‘blog’. They’re an interesting and important topic because Yield Spread Premiums drive business transactions in the mortgage industry, this is a hard fact. As a former mortgage broker (owner/operator), YSP’s were a focal point of who we did business with as a matter of practical business economics.
The wholesale lender who offered the ‘best pricing’ (paid the most in YSP’s for a given set of products) often got a bulk of our business, unless their processing was so terrible it caused closing dates to be missed or something of that magnitude. Any broker or banker who tries to represent otherwise is either lying or talking out of both sides of their mouth.
Improper disclosure of YSP’s have had a staggering detrimental effect on this industry. Very viable, valuable programs like Option ARM’s were destroyed because of improper YSP disclosure. Brokers sold these programs based on the low monthly payment option they offer and then juiced them with margin that caused consumers to defer inordinate amounts of interest to the loans principle balance and caused future rate adjustments to blow people right out of their homes. Similar dynamics exist within other mortgage programs as well.
I’m willing to step out there and say that improper YSP disclosure and use are the cause for many foreclosures in todays market. YSP’s foster higher interest rates via higher margins. Higher margins are especially apparent when an ARM adjusts, (can) cause substantially higher payments. Higher payments, or payment shock, cause defaults and subsequently foreclosures. It’s not a stretch to ascertain that proper YSP disclosure, implementation and greater consumer understanding could have prevented a number of foreclosures.
Its worth mentioning that I’m not here to lobby for the elimination of YSP’s…eliminating Yield Spread Premiums would be a catastrophic mistake, they are a vital tool for many consumers in the market for a mortgage. The average mortgage broker(age) would close as soon as their current pipeline of grandfathered business dried up if YSP’s were outlawed, it would crush the small business owner brokerages, although this may appeal to big business and the retail banks.
Properly enforcing how YSP’s are disclosed and used is vital to a fledgling mortgage broker (and banker) industry. Many in the industry will argue that Wal-Mart or some other retail outfit doesn’t disclose how much they make on a given product so why should they?…Such analogies are akin to comparing apples to arsenic. It’s worth mentioning the ridiculous laws that allow for mortgage bankers (and retail banks) the leeway to NOT have to disclose YSP’s while mortgage broker must disclose them. Hypocrisy isn’t a strong enough word here to describe the two-faced mug of the greater mortgage industry.
If their definition is as the first line of this post dictates, then every last penny of YSP on any given loan must be disclosed and credited to the consumer. If a wholesale lender is offering ‘50 bps (.5%) in YSP for closing a 5 Year ARM Purchase’ as this months ’special’, that ’special’ must be credited to the borrower.
Mortgage professionals must recognize that they are not entitled to YSP’s, they’re not a tool of personal enrichment, not a profit center, and are the business of the consumer. They need to drop the elitest attitude, compete on service and experience, and most importantly of all disclose interest rate pricing with 100% transparency, not 90% or 99%…100%.
For the mortgage professionals who say ‘I already disclose/do business this way!!’ Even if you are telling the truth in fact, nobody believes you. Consumers should ‘trust but verify’, alas there is no way to verify using todays web-based tools; blind trust is something a consumer is less and less willing to afford a perceived perpetrator of deceptive practices. A mortgage professionals value is in their service, fulfillment, and expertise levels, not interest rates. Interest rates are a commodity, a good mortgage professional is not.
Running a mortgage business under the Transparent monkier isn’t easy, you just don’t flip a switch…I was engaging David Podgursky via a Facebook convo, he was telling me that while he wanted to run with the Transparency movement, he was having a difficult time with how to ‘work’ this paradigm shift:
David:
I don’t know… I want to like transparency but I think that sometimes haziness is better … and it isn’t like I hide things but transparency in broad strokes seems to me would have implications that clients would shop based on the professional fees and that alone…
I work in Florida… we HAVE to disclose front and back end… so it is transparent! that BS HUD change makes it even more so!!
TXB:
Transparency in any marketplace causes that marketplace to have to figure out how to run more efficiently, so they can cut costs to accomodate the ever enlightened and discerning consumer. Its a nebulous, tricky proposition but an eventuality none the less…
The way traditional mortgage shops run, split % based commissions and all, are counter to participating in a transparent marketplace. This is where change needs to happen, at the core of the business model.
It’s professionals like David that inspire and motivate me. He does business the right way and wants to be as transparent as possible but the fu*#ed up system gets in the way.
Consumer demand is what can and will change how this industry operates. Consumers are demanding greater transparency and lower costs…and RESPA law happens to back them up. There are plenty of professionals who currently and/or willingly do business this way and I want to help. My intent is genuine, purposely designed to enlighten the consumer and empower the maligned quality mortgage professional.
While this article is sure to be deemed as self-serving, since I’m about to launch an anonymous mortgage application that discloses a participating mortgage professionals wholesale rate pricing feeds, every penny of YSP unveiled, what shouldn’t be lost in translation is the importance of higher education and transparency for the mortgage industry. No amount of legislation will fix whats wrong here, big biz lobbyists will make sure of that.
The mortgage industry still needs an enema and I believe I’ve got a potent one 
Next: How to Run a Successfull Transparent Mortgage Business
Also See:
Yield Spread Premiums, a Quick Study
Yield Spread Premiums, Capital Hill Testimony
RateSpeed, The Mortgage Rate Search Engine
Indecent Disclosure, Yield Spread Premium Class Action Lawsuits on the Rise
RateSpeed, The Automated Transparent Anonymous Mortgage Rate Pricing Widget
Sphere: Related Content
