Pretty funny. I was reading the post of yet another self-promoting so-called “advocate” denouncing YSPs and of course promoting his own service. Self-described “Mortgage Insider” Bob Blake claims that according to “the only YSP study worth quoting,” presumably because it supports his own views, the average YSP is 1.7% which (according to him) must mean the 90% of the borrowers who choose to not come out of pocket for all their fees must be getting ripped off. I have a different interpretation, which I’ll share here. After sitting around waiting for moderation my comment was dropped off — maybe this guy lacks the guts to print anyone who can disagree with him and has a few facts too. Since he won’t put it up I will:
This argument has always seemed specious to me. If borrowers shop a bit, determine what loan type is best, compare the offerings of several lenders, and select the best deal, the lender’s profit margin is irrelevant. The gougers just can’t be competitive, especially in this economic environment and with the ease of online loan shopping today. It’s just like any other purchase — if you do your homework you’ll probably pay less, and if you don’t you may pay more — whether buying a car, a house, or a pair of shoes. And the shoe store’s profit is none of my business — I don’t have to shop there if I think they are ripping me off.
If the average YSP is 1.7% then maybe that’s the going rate for performing the service. No one’s putting a gun to people’s heads, we have a capitalist system, not a fascist one. And if brokering is such easy money then why do so many people who go into mortgage lending leave with their tails between their legs or completely burnt out? It can be a tough way to make a living. According to the US Bureau of Labor Statistics, median earnings of loan officers in 2006 (an outstanding year for mortgage lenders) were $51,760 — not exactly raking it in. And the BLS describes loan officers’ hours as “very long” to make this money.
And finally, if a broker can find a better deal, manage to give the borrower a competitive rate (and good service — muckrakers always forget how much time, energy and money it takes to maintain expertise and find solutions for borrowers who present challenging situations) and make a decent profit why is that bad? In any other profession if you are better than your competition you deserve to make more. Last I heard that was why we choose to live in America and not Russia.
Great post and dead on, competition is a good thing for the consumer!
One caveat I keep ranting on, one more time if you will allow. Currently FHA is the only solution for many. In South FL anyway, FHA approved brokers/lenders are extorting this only option program. I am not FHA approved, nor will I be anytime soon as I left wholesale in June 07 and opened my mortgage company in July 07. I will not play around with the net worth requirements and have not been able to honestly meet the $63,000.00 company net worth needed for approval. Daily I am contacted by FHA approved brokers/lenders that want me to refer clients to them. They are clear that I will get paid a, “fee,” for doing so. I won’t as it would be illegal for the owner of a mortgage brokerage business to do so simply in an attempt circumvent the lack of FHA approval. Many have told me up front they will need to be around 7.25% for doing so. I have not checked lately but not too long ago 7.25% was paying 3.875% YSP, they also intended to charge 1.00% in origination. I understand that one can charge what they believe is appropriate. In my opinion 4.875% in YSP and origination alone is not the solution FHA intended for the resetting 2/28 and 3/27 borrowers hoping to avoid foreclosure. Clearly not all are over the top greedy, thank god for the cavalry of fair minded folks. We need more FHA approved consumer-centric brokers, let us hope that FHA reform includes the option of posting a $50,000.00 surety bond in lieu of the net worth & audited financial statements. Access to the critically important FHA mini-eagle is mandatory if one wants to be a part of the solution. (see my post dancing with the devil)
I am seriously beginning to consider the net branch option, let’s see what FHA reform holds.