Loan Points and Yield

[alvin]

I was just talking to a friend of mine who's a loan officer in vegas and he charges 4-5 points up front and 1-2 points in the back(yield). Just wondering if this is typical and how do you compete without doing a 'bait n switch.' everything is disclosed up front in terms of points and junk fees, so nothing is hidden from the client.

for example,
So when the loan is finalized, the average points charged to a loan comes out to 4% of 200k = $8,000. 50% goes to his broker, so my friend makes $4,000 in commission + his base salary.

i think being a loan officer is better than being a realtor since i would have to drive around around and do open houses, while my friend sits in his office and do paperwork and phone calls. hmmmmmmmmmmm. very interesting.

[Erik]

That's not typical from my experience. 1% on the front is typical I would say.

[alvin]

okay i found out the reason why he charges 4-5 points up front is subprime clients. is this still typical? also when he charges 4-5 points, does this bring down the rate or this is just mainly his incentive to work with the client in getting a loan?

[Greg]

It is a very competitive market and many people are becoming more and more educated.

Ditech and E-Loan are the discounters of this industry. Many Bankers are not paid the same as your friend either. Some are paid a salary and a commission based on other items rather than origination and yield.

In some cases, and it could be all if that is what you want to do, you could do that. Charge 4 points.

The long term effect is them finding out you overcharged versus broker/banker b and they do not come back.

Sacrificing short term gain for long term repeat business is what I do. Typically 0-2% front and little back end but most cannot even see this on a HUD if you are a Banker.

Brokers must disclose Yield Spread on a HUD. Bankers do not have too if it is their own product lines. Sometimes Brokers can set up correspondent relationships for better pricing and in doing so they do not disclose Yield.

[MartinMtz]

Sad to say but that does happen alot here in Vegas. We have had numerous people come into our office to refinance and OMG did the get screwed by their original loan officer. We are only allowed 1point in the front and max 2 in the back. If we exceed that, our President of the Co gives us the boot.

Its best to be honest anyways. They never went back to that loan officer, instead ...we did their refi, guided them to bringup their credit and did the loan for their 2nd property, and their 24yr old daughters, and her mother-in-law is suppoed to be calling our office next week.

honesty = loyalty = referrals. and of course they like the $500 for purchase referral and the $300 refi referral we give them

[Greg]

Very nice ethics in your company. I am glad to see these kind of practices Martin.

[COLOANHound]

Back on here to respond to this post. Hope I don't get neg rep points. I really don't see how these types of deals are closing. Four and 5 points is ridiculous* the client is NOT receiving any benefit from this and in most cases there IS a PPP attached to the deal.

A close freind on mine works for H&R Block* consistantly getting anywhere from 4-5 on the front and back combined. The best part is that their marketing is very strong* so typically the leads they get are solid* meaning these clients could very well shop a little and find something better. Like Greg mentioned* these clients will eventually find out what they received was not competitive.

He's thrown a couple of these deals my way that did conform to their guidelines. When I called these people to go over their situation* I usually found that I was the hero. "Wow* your closing costs and rate are a lot lower than Joe's." I guess my point is* try and get his deals!! Just playing. Stick to the upfront honest approach and 1-3 points gross* and you'll be in the game a lot longer. My .02

[The Wizard]

Martin*

I am glad to see that your management wants his employees to provide a service not take a borrower to the slaughter house. Besides like you said "Do right by the borrower and you will have the opportunity to serve him and all of his friends and relatives." Everyone knows we need to make a living just not a killing. Besides with volume you can make a very nice living.

1 point on 10 loans is 10 points. 10 points on 1 loan is not allowed. Go for networking and contacts it builds volume.

[HisHouseMortgage]

It looks like this predatory lending is common all over the country. Ever since 1999 when one of the largest non-conforming lenders (won't mention name) went bankrupt. alot of their loan officers and managers went out on their own opening broker shops all over and doing the same kind of business that got their original company in trouble in the first place. These deceptive practices suuch as table closing and bait and switch tactics is the reason some states are comming down on our industry as a whole.
So Alvin my answer is yes you can play the "get rich quick" game and be in another industry in a year or two or you can charge a fair market value for your services and over deliver in honesty and integrity and be part of this industry for the long haul. If your friend told you he just made $10*000 by robbing a bank would you go rob one also? The decision is yours.

And MartinMtz* I love your bosses philosophy but be very careful about.
honesty = loyalty = referrals. and of course they like the $500 for purchase referral and the $300 refi referral we give them
caution