Home Buyer Beware – Part 9

This may seem a little off track but this is important  

 

  Sunday there was an article ran in the Orange County Register with the title “Taxpayers slashed by Freddie.”  The article is written in most part with facts but embellished facts from my opinion.  This is an example of the on going Media propaganda that clouds our judgment.  Loans that were done between 2002 & 2008, the so called article idiot loans, were done with real time financial data available at that time.  These loans are not being done today so what is he talking about?  This is where our Common Sense should step in. 

  Ok then let’s break down how the system works.  Most people blame President Bush, Congress Blames the Banks, The Banks blame first Brokers and then President Obama, the Banks & the Media blames Brokers and the Broker’s are the whipping boys.  We all share a common goal here we just go about it in different ways.  Men are from Mars and Women are from Venus is much like Democratic are from _____ and Republicans are from ______.  You fill in the blanks. 

   So do you really understand how the money was flowing from top to bottom in a broker structured mortgage situation?  Below is a money flow chart that clearly showing how the money changed hands.  So you all understand the top investor is 401K, Hedge & Bond Fund money or our retirement money to be specific.  The Investment Packager is companies like Goldman Sachs and others.  The Mortgage Bond Agent is the Bond Broker or Fannie Mae & Freddie Mac.  The Lender is the Banks. The Mortgage Broker is the Media whipping boys.  And the Home Purchaser is you.  So the old analogy is true in this case as ____ rolls down hill.  Again you fill in the blank.          

    So you can see all of the blue stops on the above cash flow chart.  Each blue location is a payday or money stop for someone.  The Home Purchaser received their home as their form of cash. 

  The Media and Banks continued blaming of the Brokers has turned from a way for the Banks to get nearly free money from the Feds.  To now, an attack on Broker’s to eliminate the Broker commissions.  So where does this 1% broker money go?  Well if you think it is in your pocket forget about it.  The plan is for the Banks to keep the Brokers cut along with their own.  Also what do you think is going to happen if there is less competition to the cost of a loan.  Right again the cost goes up!  If Bank realy wanted to offer us deals then thier pricing would be less than a Broker’s pricing.  But as we spoke before then hide behind no fees and A.P.R. statements that in most cases the L/O you are speaking with can not even explain how the A.P.R. works if you ask them. 

   The point here is not to say a broker or a bank mortgage is better than the other but rather for you the home buyer to take the time and understand what it is you are getting into.  There can not be any good without evil.  Be diligent from the start of your escrow and get at least a Broker and one Bank mortgage offer.  You must be diligent as once an offer to purchase a home is excepted you are on a 17 day count down.  Make any Loan Officer that you deal with give you a Good Faith Estimate as this is basically a one-way contract which is binding.  Do take your time on your loan approval and remember you are not obligated until you sign your loan docs and give your thumb print. 

   Hear is another tip, any Loan officer Bank or Broker that requires an up front fee of anything is only hedging their own bets in the event that you do not meet their guidelines aka do not qualify.  This money is not refundable, in most cases, so understand what it is you are doing before you agree to pay money to

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