Rising Interest Rates not as Costly to Mortgage Borrowers as Hidden Broker Compensation

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Mortgage Industry Expert, Mike Sanborn, President of Saint Lawrence Mortgage, Reveals Six Absolute Need-to-Know Points to Help Shield Borrowers from Bad Mortgage Deals Hidden fees and lender yield spread often double compensation for mortgage brokers. Learn what to ask a mortgage broker before it’s too late – and why more transparency and accountability in the mortgage industry will save borrowers money and actually reduce interest rates on a loan.

While many home buyers continue to pay hidden fees, points and rewards to mortgage brokers, Saint Lawrence Mortgage president, Mike Sanborn, says the mortgage brokerage industry may be one of the slowest to react to a consumer’s right to financial transparency since post Enron/Red Cross corporations started taking pains to be open and accurate with how investors’, donors’ and customers’ money is made and spent.

Sanborn has posted six absolute need-to-know points every borrower should be aware of before signing their paperwork at: http://www.saintlawrencemortgage.com/news1.html.

“A great example is yield spread premium or YSP,” says Sanborn. “Borrowers most often do not know about this amount which is paid by the lending institution directly to the mortgage broker when a loan closes,” says Sanborn. “This reward is great for a broker and but can be costly for a borrower.”

Sanborn believes his company’s philosophy of charging clients an upfront flat fee regardless of loan amount, which provides wholesale direct rates is the best option. He says the industry norm is to leave borrowers in the dark about the total compensation, which can include yield spread/lender paid rebate, origination points, discount points, administrative fees, broker fees, credit fees and broker processing fees. In the meantime, borrowers also pay lender fees, appraisal fees, title/escrow fees, recording fees, reconveyance fees and in certain states, taxes.

“Though interest rates may trend upward again soon,” Sanborn says, “the real problem is obtaining a mortgage with a higher than necessary interest rate due to excessive and hidden yield spread paid to brokers by the lenders.”

YSP directly increases the loan’s interest rate and may leave the borrower unaware of a pre-payment penalty even though it is mandatory in many states for the Good Faith Estimate to disclose lender-paid compensation.

Despite the numerous costs, most borrowers obtain home financing through mortgage brokers. Advantages brokers bring to the table include protecting credit scores when researching lenders, quick access to comparative tailored rates and products, coordinating home buying steps such as appraisal, title and escrow and timely closings.

“Something like the YSP incentive for brokers means that borrowers may not see the actual wholesale or Par Rate,” Sanborn said. “Most borrowers don’t know that it may be possible to get a much lower rate than quoted.”

Sanborn says that borrowers should also pay close attention to the APR. The greater the difference between the note rate and the APR, the more one is paying in fees to obtain the loan.

“Whether you are going to be in the home for 1 year or 30 years, you should be able to get the best available rates and know exactly what you are paying and what your broker is making on the deal,” says Sanborn. “The claim is not that a mortgage broker should work for free, but that their compensation should not be a secret.”

About Saint Lawrence Mortgage

Saint Lawrence Mortgage provides clients the most competitive home financing options available on a Flat Fee basis while providing up front disclosure and access to wholesale direct pricing. SLM is a proud member of the Upfront Mortgage Brokers (UFMB). SLM is based in Everett, Washington. More information about the company can be found at: http://www.saintlawrencemortgage.com.

View information on SLM’s flat fee/wholesale loan philosophy at: http://www.saintlawrencemortgage.com/gpage.html.


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Bob Hawk
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