I will Personally call You when Interest Rates Go Down!….Say What??

Recently a couple that had been dealing with another mortgage broker for a refinance in San Jose, contacted me because they did not feel very comfortable with him. The reason of their discomfort was the way the mortgage broker was pressuring them to obtain a loan he assured them would be the best choice.

I turns out this mortgage broker was pressuring the homeowners to refinance their home into an Option ARM loan also known as the Negative Amortization loan. He vaguely offered them other options but was very persistent about the Option ARM. He even went to the extent of telling them “I will personally call you when interest rates go down so you can refinance with me to a lower rate.”

Of course I immediately knew the reason why he was so persistent but I did not say anything to the homeowners as I wanted to show them the reason instead of just explaining it.

They showed me the Good Faith Estimate he had prepared for them and sure enough the mortgage broker was charging the homeowners a total of 3.5 points between the commission (points) and the yield spread on the transaction. Generally on average a normal commission on a refinance is anywhere between 1.5 to 2 points but this guy was trying to get away with 3.5 points…unbelievable. Read this post about how to recognize predatory lending so you don’t fall victim to these types of “loan sharks”.

Nobody works for free and everyone involved in a purchase, sale or refinancing of a home will get paid one way or another, even if the mortgage broker offers “No closing costs” or “No points” on a mortgage transaction. When a no closing cost or not points refinancing is offered, the closing costs will either be added to the loan therefore you end up paying interest over these costs or simply you will end up with a higher interest rate loan than what you normally would get. Either way the mortgage broker gets paid one way or another, nobody works for free!