Internet mortgage modification SCAMS alert!

As I just searched the web for information on mortgage modifications, I realized that MOST sites are operated by LEAD GENERATORS.

How scammers make a ton of quick money:

There are numerous mortgage modification websites that LOOK like official government web sites, requesting that home owners enter lots of personal information.  They SELL your data to the highest bidder(s) for $50-150 — depending on your “qualifications”.

Of course you data is often sold to criminals, since they are likely to pay much more than a legitimate company.

IMPORTANT:  MOST Google ads for financial services at Liars and Cheats EXPOSED are for SCAMS.

Just like the lead generators described above, Google sells the ad space to the highest bidders, usually scammers.  For more information please read http://liarsandcheats.info/advertising/.

I did check out http://makinghomeaffordable.gov/ (make sure you go to .gov sites).

At  http://makinghomeaffordable.gov/eligibility.html are some program descriptions.  For the most part, it’s also a giant scam to help LENDERS get as much of YOUR money as possible.

Yesterday I wrote about rumors indicating that a program that actually helps the people by reducing the PRINCIPAL balances might be in the works, but the White House denied such plans.

Mortgage modifications with PRINCIPAL reductions?

While corporations and bankers received trillions of bailout dollars (enough to PAY OFF every mortgage in America), homeowners have been traumatized by lenders unwilling to modify mortgages or at best, eventually lowering the interest rates while ADDING delinquent amounts and fees to the principal balances.  Supposedly lenders CAN lower principal balances under the current programs, but that doesn’t seem to happen.

As always, the people who most NEED help are incapable of fighting for their rights and often don’t even understand the implications of the ever increasing balances.  And that’s why I have been recommending that people with financial problems and mortgages exceeding their home’s value simply WALK AWAY from the homes.  And of course they should live in their homes as long as possible after they stop making payments.

So I was thrilled to read this article today:

An August Surprise from Obama?

Aug 5, 2010 00:26 EDT

Main Street may be about to get its own gigantic bailout. Rumors are running wild from Washington to Wall Street that the Obama administration is about to order government-controlled lenders Fannie Mae and Freddie Mac to forgive a portion of the mortgage debt of millions of Americans who owe more than what their homes are worth. An estimated 15 million U.S. mortgages – one in five – are underwater with negative equity of some $800 billion. Recall that on Christmas Eve 2009, the Treasury Department waived a $400 billion limit on financial assistance to Fannie and Freddie, pledging unlimited help. The actual vehicle for the bailout could be the Bush-era Home Affordable Refinance Program, or HARP, a sister program to Obama’s loan modification effort. HARP was just extended through June 30, 2011.

The move, if it happens, would be a stunning political and economic bombshell less than 100 days before a midterm election in which Democrats are currently expected to suffer massive, if not historic losses. The key date to watch is August 17 when the Treasury Department holds a much-hyped meeting on the future of Fannie and Freddie. A few key points:

1) Republican leaders believe this is going to happen since GOPers and Democratic moderates in the Senate are unwilling to spend more taxpayer money on more stimulus. But such a housing plan would allow the White House to sidestep congressional objections and show voters it is doing something tangible about an economy that seems to be weakening.

2) Wall Street banks are alerting their clients privately to this possibility. Here is what some are cautiously saying publicly. This from Goldman Sachs:

I sure hope this will happen.

Finally some real relief for the PEOPLE.

It’s too late for the many who already lost their homes, families, health and lives.  But, better late than never.

A WHOLESALE mortgage rate sheet and FICO score requirements

Since I subscribe to various industry newsletters and sites, wholesale lenders sometimes email me their rate sheets:

8-5-10-wholesale-ratesheet-pub

I redacted the contact info because some readers would contact them and they do NOT make loans to individuals, but work with BROKERS only.

If you’re looking for a mortgage to purchase or refinance, you should learn how mortgages work.  This rate sheet is very helpful to determine the COSTS.

They publish the current INDEXES, such as Prime, LIBOR and Treasury.

The FEES for underwriting and funding are about $1,000.

Next is the LOCK information. The longer the rate lock, the more it will cost you.

“0.250” = 1/4% of the loan amount.

To lock or not to lock?  If you think rates will go down or rise just a little, don’t pay extra for a lock.

CONVENTIONAL CONFORMING FIXED RATES

Today’s pricing for a 30 year fixed conforming loan:

Rate – 15 Day  30 Day

4.875% (2.95) (2.75)

The NEGATIVE numbers mean that they will PAY the broker.

In this case, they pay 2.95% of the loan to the broker for a 15 day lock and 2.75% for a 30-day lock.

If your loan is for $400,000, they’ll pay the broker almost $12,000!

This is how NO COST loans are paid for.  The broker uses the funds received from the lender to pay for the COSTS, such as the underwriting and funding fee and other CLOSING COSTS, such as title insurance, escrow, appraisal and many other fees.

You can see that the potential for HUGE undisclosed broker profits and most brokers won’t hesitate to make $10K+ on one loan — if they can get away with it (unsophisticated borrower).

PRICE ADJUSTMENTS

Of course you pay more for duplexes, condos, rentals, high balances, cash out, etc.  Notice the “Max Rebate”, the maximum amount a broker can receive.

Don’t miss the PRODUCT NOTES with more info such as FICO score requirements and the states they lend in.

CONVENTIONAL LTV/FICO Grid

The first table applies to all programs with amortization LONGER than 180 months, or 15 years.

The first column is the LTV (loan-to-value).  If the APPRAISED value of your  home is $400K and your mortgage is $300,000, you look at the 3rd row: 70.01 – 75% LTV.   If you were to borrow 300,001, the loan could cost you 1/2 point more –depending on your FICO score.

The LOWER your FICO score, the HIGHER the cost of the loan.

For this particular lender, you get the lowest cost with a 720 or higher FICO score unless your LTV is 75.01 – 80%.

Don’t ask me how they come up with that stuff.  It’s just a way to charge some people more than others and they might as well use your birth date, number of letters in your name or some other arbitrary number to determine your mortgage rate.

FICO scores do NOT predict defaults.

I posted in 11/08:

Lenders agree: FICO scores caused the credit crisis

Incredibly, NOTHING happened and FICO scores are STILL required for conventional mortgages.

Logically, FICO scores CAUSE defaults because people with low FICO scores pay more interest and higher insurance premiums, leaving less cash to pay the bills.

I documented back in 1997 that FICO scores are a FRAUD and I can guarantee to increase FICO scores substantially for most clients with the resources to settle collections and to follow my recommendations, including suing credit bureaus until they report ACCURATE information. FICO scores are easily manipulated and paying your bills on time is only one of many factors.

MUST READ:  FICO Scoring Basics

HOW TO GET THE LOWEST MORTGAGE RATES

Work only with a broker willing to provide you with the wholesale rate sheets for their preferred lenders.  There are MANY wholesale lenders and they all have different pricing, requirements, add-ons, restrictions, etc.

Most brokers submit most of their loans to one or two lenders because they expect ADDITIONAL rebates for high volume and/or sometimes a wholesale lender will approve loans they would normally decline for a broker who brings them LOTS of business.

Some wholesale lenders advertise the lowest rates, but provide inferior service, lose documents, don’t meet deadlines and might decline a loan application to avoid having to fund because they would lose money on the loan. It’s a complicated business and there’s a lot more to watch out for than the quoted rate.

Don’t get hung up on half a point, especially if it’s a purchase. Closing on time and without major stress is often much more important.

My background

I was a California mortgage broker in the 90s and it wasn’t easy to keep up with the constant changes in pricing (sometimes several times a day) and new requirements coming out of nowhere.

Many brokers ADVERTISED much lower rates and even highly regarded loan professionals were TEACHING how to quote 1/2 point less on the phone and then lying about a rate increase when the borrowers came to the office to complete the application.

Add to that the problems with appraisals coming in too low (California was in a declining market) and of course credit bureaus NOT correcting the credit reports and not being allowed to charge for my services UNLESS the loan closed. I only charged $2,000 per loan and applied extra rebates to closing costs.

The final nail in the coffin was the requirement for FICO scores.

Starting in the mid 90s, it no longer mattered that my clients had settled their collections, re-established credit and done everything I had recommended.  FICO scores don’t give you points for paying collections and just ONE tiny collection can lower your scores by 100 points.