No Fee Mortgage PLUS Points

By
Mortgage and Lending with San Diego VA Home Loans/858-777-9751

I actually went into the bank lobby yesterday and noticed an advertisement for a "No Fee Plus Mortgage".  After reading the terms and conditions of the offering, I realized that it was no great bargain but a pretty smart marketing ploy.  Here's what I saw (the date was partially  cut off but it was June 20, 2008):

 

Bofa_6_20_2

 

This means that the bank is absorbing some $3,500 in costs, on a $320,000 loan but charging a discount fee of 1.312 % (or in this case, some $4198.40).  So, the total charges for the bank's "no fee mortgage plus", at 6.5%, would be $4,198.  I would offer the same loan terms for the $3,500 in costs.

Advantage:  Brady by about $700 for the 30 year fixed rate loan at 6.5%.

On the 5/1 ARM example, at $320,000,  I would charge the $3,500 in fees plus 1.25% for a discount fee, totaling $7,500 in costs.  The bank offering absorbs the $3,500 in costs but charges the borrower a discount fee of 2.228 % or $7296.

Advantage:  The Bank by about $300 for the 5/1 ARM at 5.5 %.

It's just prestidigitation and the mortgage industry is famous for it.  Banks, brokers, we all go to the same place for funding (Wall Street).

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Ambassador
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Lenn Harley
Lenn Harley, Homefinders.com, MD & VA Homes and Real Estate - Leesburg, VA
Real Estate Broker - Virginia & Maryland

Very interesting.  And, I suppose these rates are for good FICO scores???? 

Jun 21, 2008 10:37 AM #1
Rainer
70,747
Bill Nazur
Corona, CA

if only it were so simple.....but i understand your position.....the sleight of hand comes from you as well in that you can go to 95% (sometimes 90% in a declining market) with one loan, no MI, and no mandate for impounds.

given that, would you still say advantage Brady?

Jun 21, 2008 11:08 AM #2
Rainer
12,363
Shaun Wren
AGENTFORLIFE - Lakeland, FL

Brian it is fuuny how many people actually think that the banks are in bussiness to save people money. Banks are in bussiness to make money. They take your money in and loan it to other people to make more money.

Jun 21, 2008 12:27 PM #3
Rainmaker
826,128
Fran Gaspari
Patriot Land Transfer, Inc. - Limerick, PA
"The Title Man" - Title Insurance - PA & NJ

Brian,

Of all the 'schemes' perpetrated on consumers by lenders, these 'premium pricing' slights of hand are the most aggregious...and the ones most consumers are fooled by...especially those who 'shop rate'!!! Thanks,   Fran

Jun 21, 2008 01:40 PM #4
Rainer
22,390
Jeremiah Wean
Lakewood Lending Group, LLC (NMLS#132141) - Indianapolis, IN
NMLS#132221

No magic money.  Where did the no fee come in, or was the no fee part washed out by the plus.

Jun 21, 2008 02:26 PM #5
Rainmaker
188,958
Susan Milner
Florida Future Realty, Inc. - Cape Coral, FL
Cape Coral Real Estate Broker, FloridaFutureAgents

Nice. I love those type of ads....Not.

Jun 22, 2008 11:45 AM #6
Rainmaker
149,087
Gary Miljour
Lend Smart Mortgage NMLS#207208 - Southern Pines, NC
Mortgage Originator NMLS Licensed in AZ and NC

Banks, brokers, we all go to the same place for funding (Wall Street).  

So true, but the public is duped everyday.  Good straigt forward explanation.

Jun 22, 2008 07:53 PM #7
Rainmaker
316,220
Wayne L. Brown
Franklin Advantage Inc. - Alpine, CA

Brian

Kind of like we Brokers have to disclose all fees including any back end or rebate commonly referred to as YSP.

If you are a Bank or Mortgage Banker who funds the loan and then sells on the secondary to Wall Street, no disclosure of the backend fees are required.

THE DRE clearly points out that there is no such thing as a No Fee or No Cost Loan.  We Brokers have to disclose, but again the Banks and likes of Ditec are not required to follow the same rules as you and I.

Go Figure.  Regulations for the chosen few...Lol.

Unbelievable.

Best Regards

Jul 02, 2008 04:36 PM #8
Rainmaker
311,669
Brian Brady
San Diego VA Home Loans/858-777-9751 - San Diego, CA
858-777-9751
Jul 02, 2008 04:49 PM #9
Anonymous
Richard

I applied for this loan and got a better deal than the fee based mortgage, the only set back is that I have to put 10 percent.  I was asked to purchase points but I chose the lowest option buying .125% points and will get an rate of 5% with apr of 5.011.  and all i have to pay at closing is $180.  They did try to get me to buy 2 points at 2600.00 but I told them no thanks.

Feb 18, 2009 08:11 AM #10
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Brian Brady

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