Your only unbiased source for mortgage and credit information. I don't take applications or "harvest leads." I help people of all credit types avoid ripoffs and save money - since 1999. -- Carolyn Warren
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Common Mortgage Rip-Offs and
How to Keep From Getting Burned

by Carolyn Warren

RIP-OFF: The most common complaint I hear is the non-disclosure of a prepayment penalty. So often I have heard from homeowners wanting to refinance out of their high interest rate loan that they don't have a prepayment penalty, when in fact they do. When they discover this, they are really steamed, and who could blame them? The typical prepayment penalty is 6 months' interest on 80% of the balance. (For a rough estimate, multiply the monthly payment by 5.) Their response is usually something like, "No one told me about a prepayment penalty," or "They told me there was no prepayment penalty."

SOLUTION: Ask up-front if there is a prepayment penalty on the loan, and if so, how long it lasts (anywhere from 1-5 years). Then when signing, ask, "Show me where it says there is no prepayment penalty," or "Show me the terms of the prepayment penalty."
Conforming, low interest rate loans do not have prepayment penalties. Creative, non-conforming loans do have prepayment penalties most of the time. As long as the duration of the penalty matches with the time you plan to keep the loan, then there is no problem. Seeing it in print before you sign will prevent an unwanted surprise.

RIP-OFF: The overpriced biweekly mortgage payment plans that are now being advertised. The plan is sound, the rip-off is the cost - typically $400 for a program you can do yourself for free.

SOLUTION: We wrote this one up separately. Look here.

RIP-OFF: Paying too much in fees is a rip-off. This could be in paying too much for loan origination, loan discount, broker fee, or various "junk fees." Comparing the APR (annual percentage rate) is supposed to give consumers a fair comparison, but it does not. Why? Because some companies and banks have tricks to skew the APR. How then can you truly know if you're getting a good deal?

SOLUTION: I am exposing all the tricks, lies, and hidden secrets that cheat home buyers and home owners refinancing out of their hard-earned money. When one mortgage broker heard about this, he said, "Oh-oh, we're dead!"

Clayton Makepeace, founder and president of The Profit Center said, "Carolyn Warren better get a body guard. Her new tell-all on the mortgage industry exposes so many of the lending industry's favorite frauds, every loan officer from Seattle to Miami is going to be gunning for her! Mortgage Ripoffs and Money Savers is like a map that faultlessly guides you around the carefully camouflaged land mines laid by lenders. And it gives you simple, step-by-step directions for saving tens of thousands of dollars.

"If you're looking for ways to save a king's ransom on your mortgage and monthly payments, you simply must read this book. It could easily put an extra $10,000... $50,000... $100,000 or even more into your bank account!"

RIP-OFF: Taking away your right to shop around is a consumer rip-off. Sometimes loan officers will tell people not to talk to other mortgage companies, because too many inquiries on their credit report will lower their score and prevent them from getting a good loan. This is not true! The credit bureau risk model allows multiple mortgage-related inquiries within a 14-day period without affecting your score.

SOLUTION: Inform the person telling you this that multiple inquiries lowering a credit score applies only to multiple credit card inquiries. Advise them to order the special report "Unlock the Credit Score Secret! Get Your Highest Score Ever and Save Thousands of Dollars!" There they (and you) will discover extremely valuable, little-known, and never-told inside information.

True Stories that Could Happen to You

How George Got Bilked $2,700

When I was a new loan officer working for a well-known national lender that advertises extensively, I saw a customer I'll call George get bilked $2,700, and he never knew it. Here is what happened...

George was doing a cash out refinance to make some home improvements. His loan amount was $135,000, and he was paying three points (3 percent of the loan amount). He was taking a non-conforming loan designed for people with damaged credit. People with excellent credit typically pay one point, so in a worse case scenario, George should have to pay double, or two points, but he was being charged triple. Then it got worse.

When it came time to sign, George asked his loan officer if he could get a little more cash out. "Yes," she said, "and that'll be an additional one point."

She swiftly raised the loan amount to give him the extra cash and then slapped on an additional $1,350 to the loan origination fee. So now George paid double what he should have paid in a worse case scenario: $5,400! In addition, he paid $995 in meaningless junk fees, which he never bothered to challenge.

When asked later how she was able to jack up his fees that way, she smiled and replied, "He wasn't paying attention." Why did she do it? Because it doubled her commission. Greed, pure and simple.

The Best-Kept Secret Lenders Don’t Want You to Know!

Many secrets are told over lunch. Casual comments, candid confessions, things that would never be said to an outsider. Little things like slipping forty bucks to the gal who locks in interest rates. Or big things like making forty grand off of one deal.

This particular day, I was dining with a loan officer at Michael’s Broiler on the 18th floor overlooking Lake Washington and the Seattle skyline.

“Forty grand. That’s amazing,” I said, cutting another piece of my filet mignon. “How did you do that?”

He tapped his linen napkin to his lips and smiled proudly. He told me what he did.

“Aha,” I responded. Perhaps my eyebrows raised a tad, but nothing more. I understood perfectly. He had sold his client an adjustable rate loan that had the interest rate of a thirty-year fixed rate loan. By selling him a rate significantly over par, he pocketed a big back-end commission from the wholesale lender.

“Did you broker out the loan?” I asked this, because I wanted to know if his client, the home owner, had any idea how rich his loan officer was getting off him.

“I did it ‘in house,’” he said this matter-of-factly.

“Even better.” He had a legal loophole for not revealing his windfall to the client. A windfall his client would pay for each and every month for the life of his loan.

My lunch companion agreed, “That’s the beauty of correspondent lending. You don’t have to disclose your YSP (Yield Spread Premium).” He finished up his mashed potatoes and expressed his pleasure about the absence of garlic.

“How long did the loan take to close?” I asked.

“Three weeks. And I had four other loans last month. But this month I plan to do more.”

Our lunch was almost over, so I had one last question. “How long have you been in the mortgage business?”

“Two years. Two more and I expect to retire,” he boasted.

I mentally did the math and figured he was right. Four years of charging clients for secret back-end commissions that big could net a loan officer enough to quit the business and get on with perfecting his game of golf.

Unfortunately, this is not an uncommon story. I know from years of personal experience that this kind of price gouging is rampant in the mortgage industry. Charging a higher interest rate than par is just one way for loan officers to collect extra pay. There are many others, and they're all exposed, plain and clear, in the book you can't afford to miss, Mortgage Ripoffs and Money Savers.

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