Did you know refinancing your mortgage is just like car buying? Most homeowners don’t know that mortgages are retail products like cars; suggested retail value is not what you want to pay when buying a car or refinancing your mortgage. Here are several tips to help you pay less when refinancing your mortgage with a wholesale interest rate.
Do you know what makes mortgage loans “retail?” Retail mortgage loans have interest rates that have been marked up by the loan originator for a commission. Your loan originator is the person responsible for putting your loan together; this person could be a mortgage broker or a representative at your local mortgage company. Loan originators mark up interest rates because the wholesale lender pays them a bonus for overcharging you. When you close on a new mortgage with an above market interest rate the wholesale lender pays a bonus of one percent for every quarter percent you overpay.
The difference between the interest rate your wholesale lender approves you and the mortgage rate you close with is called Yield Spread Premium. According to the Secretary of Housing and Urban Development Yield Spread Premium will cost homeowners sixteen billion dollars in unnecessary finance charges this year alone. The good news is that you can refinance your mortgage with a wholesale interest rate and avoid paying Yield Spread Premium altogether.
Homeowners who learn to recognize Yield Spread Premium on the Good Faith Estimate and HUD-1 statement can negotiate to find loan originators that won’t charge this unnecessary markup.
You’re already paying origination fees for the broker’s part in arranging your loan; if you agree to Yield Spread Premium you’re paying this person double, even triple they do. You can learn more about refinancing your mortgage without paying too much with our free mortgage toolkit.
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on proposed reforms of the National Flood Insurance Program. Don't worry, it's short, and the last few pages are a table summarizing provisions. Some of the proposed changes make good sense: raising the limit of flood insurance policies and contents coverage, allowing FEMA to charge actuarially sound rates for commercial and non-primary residences (primary residences will continue to be subsidized across risk classifications, however); dramatically increase the penalties for lenders that don't require flood insurance in flood plains; and new lines of coverage including business interruption insurance.
But look at the list of concerns identified with the NFIP, and see how the proposals fall far short of addressing all of them:
increased need to borrow from the U.S. Treasury; the need for the program to bring in sufficient premiums to cover the federal outlays of funds used to pay claims;
substantial premium cross-subsidies among classes of policyholders;
outdated flood maps that will form the basis for making decisions about where and how to rebuild the Gulf Coast, and the need to modernize them to more accurately reflect flood risk nationwide;
costly impact of repetitive loss properties;
allegations of uneven compliance with mandatory flood insurance purchase requirements when the property is located in federally designated special flood hazard zones (SFHA);
inadequate management and oversight of private insurance companies (Write Your Own insurers) that write insurance policies and adjust claims for the NFIP, vendors that supply services to the program;
inadequate education, training, and technical assistance for private insurance agents and adjusters; and
federal government long-term exposure to potential changes in weather-related risk, which could have significant implications for the nation’s growing fiscal imbalance.
One of the biggest of these is repeat losses on the same property, where owners keep getting a de facto subsidy instead of relocating. This was supposed to have been changed in the last reform, but the problem continues. Also not completely addressed is cross-subsidies among classes of policyholders -- FEMA still won't be able to charge actuarially sound rates for primary residences. Also, the NFIP owes the Treasury some $20 billion, and the program generates insufficient capital to create its own reserves, much less repay an enormous sum like that. The report acknowledges debt forgiveness has to be considered, but that is not in this bill at present.
You might also notice inadequate supervision of the Write Your Own companies is listed, probably as a sop to those who insist private insurers ripped off the Treasury by transferring their obligations for wind damage to the taxpayers by wrongly paying out flood damages. Yet the bill itself doesn't appear to address that concern. I wonder why not?
Looks like Mississippi Insurance Commissioner George Dale is not taking lying down. Dale has upped the ante on the Scruggs Katrina Group, announcing the settlement of . Here is an additional story with information about further State Farm settlements in Mississippi.
Lord knows I am no fan of coasting, taking it easy or giving anything less than maximum effort, but between blogging, projects for Appleman's on Insurance and . . . seems like there was something else . . . oh yes, a full time law practice, there's not a lot of juice left in the tank at present. I saw some other items in my Bloglines feedreader that I want to address, but that will have to wait until tomorrow. So today, only this post, unless something major breaks on the order of Dickie Scruggs challenging George Dale to a duel.
As many of you know, I am a NoDak in exile and keep tabs on what goes on back in paradise, a word I use in all sincerity because I had a great time growing up in NoDak. : it says Dickie Scruggs is among the top six contributors to North Dakota Democrats. His contribution: $10,000. Politics is pretty cheap in NoDak, if any of you are thinking of making a run for U.S. Senator, that's the place to go. If you weren't born there, of course, that is going to be a huge handicap because it will be assumed you are crazy and know little to nothing about what really matters in life, but the voting population is less than half a million, and with some effort you could meet nearly everyone and convince them you're not some wacko with weird big city ways. Below are some guidelines.
Fashion tip: get used to wearing jeans, solid color dress shirts or blouses are OK, plaid is better.
Choice of campaign vehicle: club cab pickup is mandatory. Do not wash pickup too often: too flashy.
Headgear: male candidates should have cowboy hat handy, I am willing to serve as paid consultant to tell you when it is appropriate to wear it and when you should merely have it nearby, it's too complicated to explain here. For women, no headgear is necessary, but always don baseball caps with "fun" slogans and sayings when they are presented to you.
Accent: Norwegian accent is best. High Plains nasal intonations work -- if you can fake a Canadian accent without using "Eh" or saying "beauty" or "hoser," that will be close enough.
Drink: Soda is "pop." Do not forget this. Repeat: do not ask for "soda." Avoid potential faux pas by drinking only coffee or alcohol, both are very popular beverages.
Meals: breakfast, dinner, supper. There not only is no free lunch, there is no lunch at all. You must drop "lunch" from your vocabulary. UPDATE: A reader was perplexed by this and asked whether NoDaks don't eat at noon. The noon meal is called dinner, supper is the evening meal. Breakfast is eaten in the morning, or according to the advertising of certain restaurants, anytime. Thus, there is no lunch, and I might add, also no "brunch." SECOND UPDATE: Someone else asked me why this is. I don't know, it has never occurred to me to wonder why, it just is a fact of life in North Dakota like lots of wind, lots of cold and lots of mosquitoes. Wondering why would be crazy, like asking my dad why I had to haul hay bales or drive tractor when I was a kid -- that's just the way it is. By the way, you must master this thought process or you will not make it in NoDak at all, much less be elected senator.
Tips on driving on gravel roads: speed up when a vehicle approaches, it will build an air pocket that will deflect flying rocks and keep your pickup from getting pelted. When vehicles approach at high speed in the middle of the road, do not pull further to the right, you may lose control in the soft gravel of the shoulder. Instead, drive fast down the middle of the road yourself -- they will probably eventually get over to their own side. Hold the wheel casually with three fingers of one hand to show passengers and other driver you have no fear: avoid the two-handed white-knuckle death grip at all costs, it will brand you as unfit to drive and to lead.
Political affiliation: Republican is best, moderate to conservative Democratic also works well (both senators and the state's lone U.S. Representative are Democrats). Pro-farm subsidy is mandatory, as is pro-Second Amendment stance and demonstrated ability to use guns. The local definition of moderate to conservative may surprise you -- state's heritage is being stepped on and mocked by the powers that be, and most residents are descendants of semi-serfs who fled oppressive regimes: radical populist talk goes over very big.
Where to be seen: county fairs, high school and college sporting events, duck hunting season, fishing derbies, demolition derbies (people drive old cars and crash into one another in a big dirt arena), tractor pulls, rodeos, parades, senior citizen centers, American Legion posts, lutefisk suppers. If the idea of eating -- codfish soaked in lye -- shocks you, rethink political plans. Remember that secretly, no one else really likes it either, it is merely a cultural artifact.
If you are a Colorado home owner considering a new mortgage loan, there are several steps you can take to avoid paying too much when refinancing. Comparison shopping mortgage offers will only get you so far unless you know how to negotiate for wholesale mortgage rates. Here are several tips to help you refinance your Colorado home mortgage with the lowest rate possible for your situation.
Many homeowners start their search for a new mortgage by typing Colorado Home Mortgage Refinance Loan into a search engine. This search would return a number of websites promising mortgage quotes with low interest rates. The problem with these “Colorado Home Mortgage Refinance Loan” quotes is that they include retail mortgage rates that have markup intended to give the loan originator a fat commission check.
So what makes a mortgage loan “retail?” Retail mortgages include markup known as Yield Spread Premium. This markup is the difference between the wholesale interest rate the lender approved your loan and the mortgage rate you closed with. Mortgage companies and brokers mark up interest rates because wholesale lenders pay them a bonus for closing mortgage loans with above market interest rates. For every quarter percent you agree to overpay your loan originator pockets one percent of your mortgage amount.
Here’s an example of how retail mortgage interest rates work. Suppose you refinance your Colorado home mortgage for $250,000 for 30 years at 6.75% interest rate. Your mortgage broker charges you an origination fee of one percent and tells you what a fabulous deal you’re getting. (Sound familiar?) What your broker isn’t telling you is that the wholesale lender approved you for a 6.25% mortgage rate and they’ve marked it up to 6.75% for a commission.
In the previous example the mortgage broker pockets your origination fee of $2,500 plus $5,000 from the lender for a total of $7,500. You’re stuck with an above market interest rate that you didn’t have to pay. Don’t let this scenario happen with your Colorado home mortgage refinance loan; by learning how to recognize Yield Spread Premium you will keep the wholesale mortgage rate your lender approves you. You can learn more about refinancing without overpaying by requesting our free mortgagee toolkit using the link at the top of this page.
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Last week when the Scruggs Katrina Group put out an announcement announcing it would have an announcement the next day, this is probably along the lines of what I expected: Scruggs and Allstate have entered into a settlement of Katrina claims, although the terms are so secret we don't even know how many cases it involved, or really, whether they were cases or just inchoate claims.
Of course, that isn't what last week's announcement was about, it was about the fact that the Scruggs Katrina Group has filed a lawsuit alleging that at any moment we can expect an attack from Mars, that State Farm officials are advance agents of our future Martian overlords and blend in by wearing latex people suits, and that the "Like A Good Neighbor" TV commercials will soon feature a reptilian spokesthing that will demand obedience to the new Martian order. Wait a minute. . . . It seems the complaint actually Well, that's somewhat different. Still on the fringe, but different.
People frequently find the site by typing the words “Best Refinance Home Mortgage Loan Rate” into a search engine. They’re probably searching for a rate quote; however, how many homeowners actually know what they’re looking at when they get one?
Best Refinance Home Mortgage Loan Rate will get you a mortgage with Yield Spread Premium.
Most homeowners don’t know the rate quotes they receive are actually retail interest rates. They’ve been approved for a wholesale rate but their loan originator marks that rate up to get a commission from the lender. The difference between the wholesale rate you’re approved and the above market interest rate you close is called Yield Spread Premium.
Loan originators mark up mortgage rates because they can double, even triple their commission by adding Yield Spread Premium. Most mortgage brokers and loan representatives will never tell you they’re doing this; if you don’t catch the cleverly disguised markup on your HUD-1 statement you’ll never know what your could have been. Here’s an example to illustrate how the “best refinance home mortgage loan rate” quotes can hurt you.
Suppose you’ve decided to refinance your existing $250,000 mortgage loan for 30 years at 6.75 percent. Your mortgage company charges you a one percent fee for the loan origination. One percent is a perfectly reasonable fee for a mortgage broker’s services; however, most brokers will tell you otherwise. What your mortgage broker isn’t telling you about this transaction is that you qualified for a 6.0% and they’ve marked up your rate to 6.75% for their commission. The wholesale lender pays your broker a bonus of 1.0% for every .25% you agree to overpay. In this example the broker receives a whopping $10,000 commission for overcharging you.
If you’ve ever wondered how your mortgage broker is making his Hummer payment, now you know. Your broker walks away with a ridiculous commission and you get stuck paying an above market mortgage rate. The good news is that you can stop your loan originator from lining their pockets at your expense. Homeowners who learn to recognize Yield Spread Premium can negotiate with potential mortgage brokers to avoid paying this ridiculous markup. This is much easier than you think and I’ve prepared a simple video to show exactly how to do it. For immediate access to my mortgage refinancing toolkit simply register using the link provided at the top of this page.
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Some of you may recall from last month about the Palmer v. State Farm case in federal court in Mississippi, in which I expressed some confusion as to the apparent differences between State Farm's position in that case on the effect of its anti-concurrent policy language, and its stated position in other cases.
So what is the right position? The one in the other cases. to alter or amend Judge Senter's memorandum opinion denying State Farm's earlier motion to dismiss in Palmer. The new motion, in essence, clarifies that the earlier assertions of State Farm's position in the Palmer motion to dismiss were not consistent with the company's real position and were in error. Even though the new motion does not seek to change the result of Senter's ruling, but only amend it to reflect what the insurer says is its true position on the anti-concurrent language, the Palmers are having none of it and oppose the motion, calling it "blatantly disingenuous." .
Again, as you may recall, I wrote a short piece about the anti-concurrent language including a mention of the Palmer case for RiskVue, and you can see what I wrote at a link at . I also have mentioned that I am working on a much longer piece about anti-concurrent language in insurance policies, with a focus on Katrina litigation, that will appear in another venue not too far in the future.
I consider few things in insurance coverage more stupifyingly complex than issues involving causation, and that is saying something in a field with more than its fair share of issues that can twist your brain into a pretzel. I have spent an enormous amount of time researching and working on this future article, and one of the amazing things about so-called concurrent causation is that hardly anyone can agree on what it is, much less on the right way to analyze it in the context of insurance contract interpretation, and still less on what the proper result should be. This takes me back to my law school days when Prosser and Keeton's famous chapter on Proximate Causation was assigned reading in Torts class, and I read it something like 11 or 12 times trying to figure it out, leading my friends to conclude I had lost my mind. I got an A in the class, so I think I understood it at least in part. As a work of legal philosophy, the chapter has few parallels, and it even has a certain degree of humor about it. Far from being unapproachable, it attempts to bring abstraction down to concrete reality and practicality as best it can. The authors probably have done a better job of explaining the concepts of causation in the law than anyone else ever has, and yet the chapter seems written with the melancholy understanding that if you asked 100 people who had just read it what the chapter said, you would get 50 different answers, and the other 50 people would either laugh in your face or just look at you and walk away.
The majority of confusion homeowners have when refinancing their mortgages comes from closing costs. Many homeowners simply don’t know which closing costs are legitimate and what reasonable third party charges are. When refinancing your mortgage there are basically three ways to pay your closing costs.
The most common and most expensive method for paying your mortgage closing costs is to roll them into your loan balance. This method not only raises your principle balance but the amount you pay for financing charges over the entire duration of your loan. Another common and misleading ploy lenders use are the so called “no fee” mortgage loans. These are popular among lenders like Bank of America who brag about their “no closing cost” or “flat fee” mortgage loans.
The problem with no fee mortgage loans is that are truly no free lunches when it comes to loans. Mortgage lenders never waive their fees, the simply offset them from another source. This offset almost always comes in the form of a higher mortgage rate. Why pay a higher interest rate for the entire duration of your loan when simply paying these costs will save you ten fold over the lifetime of your loan? Think of your closing costs as an investment that will bring you a return in the form of lower finance charges for the entire duration of your mortgage.
When you’re paying closing costs out of your pocket it’s important to make sure the person originating your loan doesn’t markup up your interest rate for their commission. Many brokers allow homeowners to use Yield Spread Premium to pay their closing costs. Yield Spread Premium is the “retail” markup of your interest rate for a commission from the wholesale lender. Rather than pocket this cash a good mortgage broker will let you use it to pay your settlement charges.
Dishonest mortgage brokers keep this money even when the closing costs are coming out of your own pocket, often without telling you. How can you avoid paying Yield Spread Premium when refinancing your mortgage? Homeowners who simply learn to recognize this unnecessary can avoid paying it. You can learn more about refinancing your mortgage without paying too much with our free mortgage toolkit.
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Refinancing your home loan with a mortgage broker can help you find loan offers you wouldn’t find comparison shopping on your own. One big problem with mortgage brokers is that they are paid by commission and the loan that nets them biggest commission is probably the wrong loan for your situation.
Another problem with mortgage brokers are the sneaky and deceptive tricks they use to get their commission. Because you’re already paying a perfectly reasonable origination fee for their services, any additional commission is not only unnecessary, but is simply taking advantage of people. Here are several tips to help you avoid mortgage broker tricks when refinancing your mortgage.
The biggest trick your mortgage broker is likely to pull is what’s known as Yield Spread Premium. This is the unnecessary markup of your mortgage interest rate to get a commission from the lender. Never mind that you’re already paying origination fees; for every .25% the broker inflates your mortgage rate the wholesale lender pays them an additional 1% of your loan amount. Mortgage brokers are required by the Real Estate Settlement Procedures Act to disclose this markup; however, they have clever ways of disguising it on the HUD-1.
Here’s an example of a brokered transaction including Yield Spread Premium. Suppose you are refinancing your mortgage for $315,000. Your mortgage broker tells you they’ve got a great deal for you at 7.0% for 30 years. The broker charges you one percent for the origination fee which is a reasonable $3,150 to pay. What your mortgage broker isn’t telling you is that the wholesale mortgage lender approved you for a 6.5% interest rate and they’ve marked it up because the lender pays them a bonus of $6,300 for overcharging you.
Mortgage lenders pay a bonus for loans with above market interest rates because the lender makes the majority of their profit selling loans to investors on the secondary mortgage market. Loans with above market mortgage rates bring a premium profit for the lender. In the previous example your mortgage broker banked $9,450 and you get stuck paying an above market interest rate.
How Can You Avoid Mortgage Broker Tricks?
You can avoid paying Yield Spread Premium when refinancing by learning how to recognize the markup and negotiating with potential mortgage brokers. Start by telling your broker that you understand how this markup works and will not accept a loan that includes any lender paid compensation. You can learn more to avoid when refinancing with our free mortgage toolkit.
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