How low can we go? 30 yr fixed at 3.75% with no fees...

[Cornflakes]

Not to put too fine a point on it, but could you please post a screen shot of your 2019 W-2 (unredacted)? No? We'd like to know what you earn and how you earn it.

I'm sure the answer is "How about No? Does No work for you"?

There are trade secrets at hand. Not every loan is sold to Agency. Some are pooled into securities for insurance companies as an example. These loans are structured and priced as Agency loans, but they are purchased, held for a time, and then in some cases split up and re-sold. It's possible to sell a loan as "Agency" quality paper to credit unions, even Banks. Lenders sources of funds isn't always based on an Agency sale. There are hedge funds making "Agency" quality loans.

The term "Conforming" is a better way to look at this. "Conforming loans" conform to Agency guidelines, making them a reasonably easy to trade security. That's the end product, not really much having to do with the manufacturing of the loan.

The LLPA data is easy to Google and get. When a client asks "Why isn't Owning or anyone else giving me the low 2.x rate they advertise for my Triplex rental property cash out refinance??" I steer the customer to the Agency LLPA matrix so they can see all of the Add On's making a 2.x rate more like a 3.75 rate.

My .02c

W2 is not the right analogy. I am not out there offering comparable product/service to mass at certain markup over my costs. If I ran a business, say landscaping service, I bet you that is how I'd setup my business. My costs+My markup = your cost. Besides, I share my w2 all the times to a lender when I am trying to convince them that I am the real deal, to a future employer when I am trying to win them over that I am worth the money I am asking for the job...

Another analogy...all gas stations get their supply from few sources. They then charge whatever they want and show the price to buyers way before they decide to pullover in their driveway.

All lenders (except portfolio lender) get their $ supply from same few sources, at more or less same terms (benchmarked to feds rate). Put a price tag at your door or website and boldly say that we charge this markup because we provide higher level of service, or our material cost is higher, or our operating costs are higher than the competition.

All public companies provide gross margin data. Consumers don't have a problem with businesses making profit. It is the shadiness and shenanigans that goes on into mortgage industry with almost magic-like tricks to confuse borrowers and doing everything the industry can to create the dizzying array of uncomparable options gets me.

 

[sgip]

True. Digging through a public company's quarterly data will give a professional stock analyst a fair idea of where average margins are. That's a great deal of work to what end?

Non public companies like Guaranteed Rate, Loan Depot, Caliber, smaller lenders like Owning, LenderFi, and micro Mortgage Bankers will never "lift the Kimono" and show you the goods - just as most individuals will not post pay stubs and W-2 data for others to compare income structures. Part of it has to do with trade secrets, another may have to do with the complexity of non uniform variable commissions structures making it near impossible to accurately state Net Margins.

I will say about 90% of all lender shenanigans have been eliminated by the uniform LE and CD. These disclosures are keeping consumers better informed during the process compared to years past - one good thing that came out of Dodd Frank.

 

[Cornflakes]

took me 5 seconds:
https://www.macrotrends.net/stocks/charts/EW/edwards-lifesciences/gross-margin

Profit Margins
Gross Margin
Operating Margin
EBITDA Margin
Pre-Tax Profit Margin
Net Margin

Same thing with pharma, Costco, CAT, you name it...
In mortgage industry - an appraiser charges $400/$500/$600 and it is upfront pricing
Realtor charges 4/5/6%. Home and owner stays same, variable is the service level.

What is wrong with this model?

Joe, you are a w2 earner with good credit. You get tier 1 price of $x to finance with us. You are a tier 2 credit risk and you will get y% rate for the loan you are asking. y will remain same no matter where you go as those are published rates for each tier. We charge you x because we have to pay wages to our LO, processor, UW, phone bills, internet, overheads etc. and make a reasonable profit.

Jane, you are a w2 earner, with rental property income, and a business income from your baking goods store. It takes us many more hours to put your file together and we charge x+2000 as tier 2 price.

 

[Irvinecommuter]

Only thing I would say about the model that I don't like is how the broker could get burned because the borrowers refinance or sell within 6 months. 

I understand the reasoning but people who don't care about brokers get awarded by jumping around. 

 

[Cornflakes]

In the model I am proposing, nobody gets burned right. Broker charges you upfront 2k/5k/20k to get you a loan. You, homeowner can pay it off next week, sell the hose, or refi. Next week you would make a rationale decision that the money I just paid for refi is now gone and what is my est course of action now?

 

[Irvinecommuter]

In the model I am proposing, nobody gets burned right. Broker charges you upfront 2k/5k/20k to get you a loan. You, homeowner can pay it off next week, sell the hose, or refi. Next week you would make a rationale decision that the money I just paid for refi is now gone and what is my est course of action now?

Personally, I think a little more disclosure would be good on that front.  Right now, advertising is all about "no fee" etc...but there are fees...they are just hidden behind the broker. 

But honestly...it remains to be seen how long mortgage brokers stay a viable business with all the online business and AI.

 

[Irvinecommuter]

True. Digging through a public company's quarterly data will give a professional stock analyst a fair idea of where average margins are. That's a great deal of work to what end?

Non public companies like Guaranteed Rate, Loan Depot, Caliber, smaller lenders like Owning, LenderFi, and micro Mortgage Bankers will never "lift the Kimono" and show you the goods - just as most individuals will not post pay stubs and W-2 data for others to compare income structures. Part of it has to do with trade secrets, another may have to do with the complexity of non uniform variable commissions structures making it near impossible to accurately state Net Margins.

I will say about 90% of all lender shenanigans have been eliminated by the uniform LE and CD. These disclosures are keeping consumers better informed during the process compared to years past - one good thing that came out of Dodd Frank.

SGIP...I don't know if you can speak to this but does the industry even care about racial discrimination in lending or is that something that is not really talked about?  Or is just a result of the reliance on credit scores?
https://www.revealnews.org/article/for-people-of-color-banks-are-shutting-the-door-to-homeownership/

 

[irvinian]

Just spoke with owning. I guess you need like 50% LTV in order to avoid any closing costs (kinda false advertisement). I am currently at 73% LTV and they're requiring a .5% loan fee. Any recs on where I can get a true no cost closing with it the fees being baked in?

 

[Cares]

True. Digging through a public company's quarterly data will give a professional stock analyst a fair idea of where average margins are. That's a great deal of work to what end?

Non public companies like Guaranteed Rate, Loan Depot, Caliber, smaller lenders like Owning, LenderFi, and micro Mortgage Bankers will never "lift the Kimono" and show you the goods - just as most individuals will not post pay stubs and W-2 data for others to compare income structures. Part of it has to do with trade secrets, another may have to do with the complexity of non uniform variable commissions structures making it near impossible to accurately state Net Margins.

I will say about 90% of all lender shenanigans have been eliminated by the uniform LE and CD. These disclosures are keeping consumers better informed during the process compared to years past - one good thing that came out of Dodd Frank.

SGIP...I don't know if you can speak to this but does the industry even care about racial discrimination in lending or is that something that is not really talked about?  Or is just a result of the reliance on credit scores?
https://www.revealnews.org/article/for-people-of-color-banks-are-shutting-the-door-to-homeownership/

In theory yes the industry cares which is why we have the Fair Housing Act which is supposed to prevent and make illegal racial discrimination in lending. It's just as hard to enforce though.

It's the same as a landlord deciding to not rent his place to Race A because he doesn't like them. It's illegal but how will you prove it? They can simply say they don't qualify or some other non-illegal reason to reject them.

 

[Irvinecommuter]

True. Digging through a public company's quarterly data will give a professional stock analyst a fair idea of where average margins are. That's a great deal of work to what end?

Non public companies like Guaranteed Rate, Loan Depot, Caliber, smaller lenders like Owning, LenderFi, and micro Mortgage Bankers will never "lift the Kimono" and show you the goods - just as most individuals will not post pay stubs and W-2 data for others to compare income structures. Part of it has to do with trade secrets, another may have to do with the complexity of non uniform variable commissions structures making it near impossible to accurately state Net Margins.

I will say about 90% of all lender shenanigans have been eliminated by the uniform LE and CD. These disclosures are keeping consumers better informed during the process compared to years past - one good thing that came out of Dodd Frank.

SGIP...I don't know if you can speak to this but does the industry even care about racial discrimination in lending or is that something that is not really talked about?  Or is just a result of the reliance on credit scores?
https://www.revealnews.org/article/for-people-of-color-banks-are-shutting-the-door-to-homeownership/

In theory yes the industry cares which is why we have the Fair Housing Act which is supposed to prevent and make illegal racial discrimination in lending. It's just as hard to enforce though.

It's the same as a landlord deciding to not rent his place to Race A because he doesn't like them. It's illegal but how will you prove it? They can simply say they don't qualify or some other non-illegal reason to reject them.

The fact that we need something like the FHA actually shows that the industry does not care.  I mean it should not take a law to mandate equality, especially on an industry and/or corporate level.

It can be hard to catch discrimination at a low level but the industry does not seem to take any effort to address the issue.  There are plenty of lawsuits and enforcement actions against landlords for discrimination...the lending industry seems to not be all that interested.

Also...lending theoretically is based upon objective standards and there is no "limit" to lending like there is with rental units or something like employment.

It will be interesting to see how the issue changes with fewer human beings in the process.

 

[nosuchreality]

In the model I am proposing, nobody gets burned right. Broker charges you upfront 2k/5k/20k to get you a loan. You, homeowner can pay it off next week, sell the hose, or refi. Next week you would make a rationale decision that the money I just paid for refi is now gone and what is my est course of action now?

There-in is the rub.  Processing loans is expensive. Appraisal, Title, Underwriting, Notaries, etc.  Joe the borrower earning $150K on W2 with a credit score of 750, a car payment, boat payment, $30,000 outstanding on three credit cards, still making Student loan payments is not the same as Joe the borrower earning $150K on W2 with a credit score of 750, a paid off car, no boat, no student loans and credit cards cleared every month.  Not to mention the other Joes that look like those Joes but they're 1099 gig.  The front end DTI looks the same but the backend DTI isn't. 

And of course there's the LTV of the loan 20%, 30% 50%. 

How many dimensions do you want on that chessboard? 

Basically, it's like Visa and Mastercard use in retail.  Everything we buy is more expensive because the stores take Visa and Mastercard.  The fees aren't charged to the buyer, they're baked into operating cost and buried in aggregate into the mark up.  Whether someone uses a credit card or not doesn't matter, every item they buy, they're paying for it.  The easiest way to see this is gasoline for those that have cash price versus credit price.

If you pop up Owning.com's site, their headline no closing cost has the *disclosures, clicking the link spells out not self-employed, 50%LTV, not an investment property and credit score 740.

 

[Cornflakes]

w2 Joe with backend DTI with 20% and w2 Joe with backend DTI of 50% does not cause processor any more or less effort on the file. Lender should charge both Joes the same cost.

Jane, even though has 20% DTI on backend, requires much more effort becase of w2, rental income, business income etc and should pay more.

When a naive borrower gets no cost 3.00% rate, most likely he has no clue if he paid 25 or 125 basis point over the base rate because its all hidden.

 

[Irvinecommuter]

w2 Joe with backend DTI with 20% and w2 Joe with backend DTI of 50% does not cause processor any more or less effort on the file. Lender should charge both Joes the same cost.

Jane, even though has 20% DTI on backend, requires much more effort becase of w2, rental income, business income etc and should pay more.

When a naive borrower gets no cost 3.00% rate, most likely he has no clue if he paid 25 or 125 basis point over the base rate because its all hidden.

This reminds me of the airlines who still charge $100 to change a seat even though it is as easy as hitting a couple of keys now.  It is not meant to be a fee...it is meant to be deterrent to change and profit for the industry. 

There are certainly hard costs associated with a loan but it seems to me that most loans are processed automatically and with AI now. 

I like my broker and happy that he makes money when I refi but at least he is honest with me regarding fees...90% of the borrowers don't know the difference.

 

[nosuchreality]

w2 Joe with backend DTI with 20% and w2 Joe with backend DTI of 50% does not cause processor any more or less effort on the file. Lender should charge both Joes the same cost.

Jane, even though has 20% DTI on backend, requires much more effort becase of w2, rental income, business income etc and should pay more.

When a naive borrower gets no cost 3.00% rate, most likely he has no clue if he paid 25 or 125 basis point over the base rate because its all hidden.

You keep thinking Joe is buyer, Joe is the product being sold.

 

[eyephone]

In the model I am proposing, nobody gets burned right. Broker charges you upfront 2k/5k/20k to get you a loan. You, homeowner can pay it off next week, sell the hose, or refi. Next week you would make a rationale decision that the money I just paid for refi is now gone and what is my est course of action now?

There-in is the rub.  Processing loans is expensive. Appraisal, Title, Underwriting, Notaries, etc.  Joe the borrower earning $150K on W2 with a credit score of 750, a car payment, boat payment, $30,000 outstanding on three credit cards, still making Student loan payments is not the same as Joe the borrower earning $150K on W2 with a credit score of 750, a paid off car, no boat, no student loans and credit cards cleared every month.  Not to mention the other Joes that look like those Joes but they're 1099 gig.  The front end DTI looks the same but the backend DTI isn't. 

And of course there's the LTV of the loan 20%, 30% 50%. 

How many dimensions do you want on that chessboard? 

Basically, it's like Visa and Mastercard use in retail.  Everything we buy is more expensive because the stores take Visa and Mastercard.  The fees aren't charged to the buyer, they're baked into operating cost and buried in aggregate into the mark up.  Whether someone uses a credit card or not doesn't matter, every item they buy, they're paying for it.  The easiest way to see this is gasoline for those that have cash price versus credit price.

If you pop up Owning.com's site, their headline no closing cost has the *disclosures, clicking the link spells out not self-employed, 50%LTV, not an investment property and credit score 740.

Regarding business credit card fees they treated as cost of doing business. But there are many business that do not take Amex due to the high merchant fees.

 

[Irvinecommuter]

w2 Joe with backend DTI with 20% and w2 Joe with backend DTI of 50% does not cause processor any more or less effort on the file. Lender should charge both Joes the same cost.

Jane, even though has 20% DTI on backend, requires much more effort becase of w2, rental income, business income etc and should pay more.

When a naive borrower gets no cost 3.00% rate, most likely he has no clue if he paid 25 or 125 basis point over the base rate because its all hidden.

You keep thinking Joe is buyer, Joe is the product being sold.

Good point...also I imagine the loan industry has a huge amount of data and information that is monetized.

 

[eyephone]

w2 Joe with backend DTI with 20% and w2 Joe with backend DTI of 50% does not cause processor any more or less effort on the file. Lender should charge both Joes the same cost.

Jane, even though has 20% DTI on backend, requires much more effort becase of w2, rental income, business income etc and should pay more.

When a naive borrower gets no cost 3.00% rate, most likely he has no clue if he paid 25 or 125 basis point over the base rate because its all hidden.

You keep thinking Joe is buyer, Joe is the product being sold.

Good point...also I imagine the loan industry has a huge amount of data and information that is monetized.

Just think about the average customer walks into a bank and pays money to refi.

 

[serial refinancer]

wow what a headache!

I closed my second refinance for the same home in the SAME month and let me tell you of the problems you could run into.

I refinanced back in late June and closed and funded July 31th. Then, immediately that weekend, August 2nd, I opened a loan application again with Owning and just closed the 25th and funded. It was supposed to be closed within 2-weeks so what happened?

Well it turns out when I refinanced in July, the reconveyance did not get recorded at the county. Thus, Owning and the Title company said that they previous loan was not paid off. On top of that, now my credit report shows TWO active primary mortgages for the same home. So one of them had to fall off first (the old one). 

Owning was very patient and worked with me to get them the docs. I called the first bank and they immediately FEDEX next day air the reconveyance letter to me so I can give it to Owning. Once that was sorted out, the Title company was able to proceed. Then we had to get my credit fixed so that the old mortgage would fall off.  So all in all, we took 21 days to close instead of 14.

And for the record.... I did have to do an appraisal, but that was done very early like 4 days after I started my loan application. Done and easy.

 

[Diamond Jamboree]

I am also looking to refinance..but Owning's rate does not seem to be competitive any more.

I found this onhttps://www.interactivemortgage.com/

It says 2.25% for 15-year and 2.50% for 30-year. Don't know if I should pull the trigger or not. The only disclaimer I see is that interactive requires 780 FICO score versus Owning's 740.

 

[nosuchreality]

w2 Joe with backend DTI with 20% and w2 Joe with backend DTI of 50% does not cause processor any more or less effort on the file. Lender should charge both Joes the same cost.

Jane, even though has 20% DTI on backend, requires much more effort becase of w2, rental income, business income etc and should pay more.

When a naive borrower gets no cost 3.00% rate, most likely he has no clue if he paid 25 or 125 basis point over the base rate because its all hidden.

You keep thinking Joe is buyer, Joe is the product being sold.

Good point...also I imagine the loan industry has a huge amount of data and information that is monetized.

Just think about the average customer walks into a bank and pays money to refi.

By himself, Joe is a Craiglist ad for a used iphone X.

Doc'd and titled, Joe is factory new iphone X sold by the carrier of your choice .

A lot of people have to touch it to wrap your average Joe up into a commoditized shiny package of a 1000 Joe's that are uniformly AAA, AA,A,BBB ...

A little more transparency would be nice, it's a lot better than it was. Much like new car ads the Base Price is $39,999, model shown $52,900.  Doesn't matter what rate they publish, tomorrow that rate may change, and someone won't meet the criteria to get it.