by Brian Brady
Commercial Real Estate Finance Expert
Structured Debt and Equity
Licensed Real Estate Broker in AL, CA, and FL
Jeff Corbett announced that he launched Ratespeed this week:
What is it? An anonymous, automated, transparent, mortgage program and interest rate pricing pre-qualification Search Engine widget, thingy.
Why is this important? For the first time anyone can transparently access wholesale direct mortgage interest rates and program quotes without having to talk to a licensed mortgage professional first. Yep, this is important to a lot of people.
I”ve been thinking about how to improve a mortgage shopping experience for consumers and am enthralled with both Jeff’s offering and the Zillow Mortgage Marketplace. Both platforms are trying to better display information to consumers about loan terms. Zillow approaches it from a “live market” while Jeff Corbett focuses his efforts on yield spread premium.
I think the answer lies in a combination of a suggestion Todd Carpenter made, about eliminating all yield spread premium disclosure, and the Bank of America No Fee Plus Mortgage. I demonstrated how the No Fee Plus Mortgage was no real bargain today, after I visited my bank.
There is an answer. Isolate one variable; rate. Make loan originators guarantee all third-party fees, as well as their fees, when quoting mortgage terms. ABN-AMRO (now Citigroup) tried this some 3-4 years ago when they offered the “Guaranteed One Fee Mortgage“. When you do a side-by-side comparison with rates and loan programs matched up, you’ll get a true cost of credit if the originator is required to manage the closing costs and disclose them as one fee.
Banks or brokers will only disclose two things to the consumer: rate and one fee. It would be stupendously simple to understand.
Dave Thompson says:
Brian-
I really like this “One Rate” idea, where all costs associated with the mortgage are included. In hindsight, the Govt’s earlier attempt at transparency, APR, did more to confuse the consumer and allow bogus mortgage professionals to manipulate. How do you think the idea will be received in light of the current “third party
separation/conflict of interest” points of view that we’ve seen with appraisal relationships? Do you think these same people would object on the grounds that we’d be controlling too much of the transaction?
Your thoughts?
Thanks,
DT
June 22, 2008 — 5:14 am
Brian Brady says:
Hey Dave,
That’s an excellent point. I’m not so sure I hate the idea of us controlling as much of the transaction as we can; it let’s us control the service, as well.
I’m more in favor for putting rogue originators and borrowers in jail, for fraud rather than trying to create legislation that makes it harder for honest folk to get a loan.
June 22, 2008 — 8:21 am
Jonathan Blackwell says:
Awesome, I want to bring the simplistic one rate concept to other areas of life. Gas for example, I don’t know how far I am traveling or where exactly I’m going, but I’d appreciate Exxon promise me a price upfront. Also equity markets, I’d like to earn 10% a year. You can handle that right?
June 23, 2008 — 6:18 pm
Brian Brady says:
“but I’d appreciate Exxon promise me a price upfront. Also equity markets, I’d like to earn 10% a year. You can handle that right?”
Of course not. I can, however, accurately predict closing costs, within a few hundred bucks, for an approved $300,000 loan, ready to be locked.
You can handle that, right?
June 23, 2008 — 6:23 pm
Jonathan Blackwell says:
Based on what the consumer “thinks” is their scenario and their suitable loan product? Probably not.
I’d be more than happy to do so once I have loan docs in hand.
June 23, 2008 — 6:37 pm
Brian Brady says:
“I’d be more than happy to do so once I have loan docs in hand.”
Define please: I think of loan docs as final loan docs- you mean qualification docs (credit, income, assets), right?
June 23, 2008 — 7:46 pm
Jonathan Blackwell says:
Obviously. Your post was about a “widget” that is quite obviously as worthless as Zillow Mortgage Marketplace.
My costs are always guaranteed once I produce disclosures for you to sign.
June 23, 2008 — 7:53 pm
Brian Brady says:
Nope, Jonathan. The widget was the catalyst for the thought. Todd Carpenter’s idea of banishing YSP disclosure and the BofA No Cost product got me to thinking how we could make it super-easy for consumers to compare loan offerings.
“My costs are always guaranteed once I produce disclosures for you to sign.”
I thought so. 😉
June 23, 2008 — 8:16 pm
Jonathan Blackwell says:
How about consumers stop searching stupid widgets and unknown internet sites in an effort to save themselves $3/mo? I’ll bet that would put a big dent in the shady LO biz. Oh, and stop calling Countrywide because they have heard their name before.
The cheapest offer is rarely the best offer. BofA’s No Fee Mortgage That Doesn’t Close On Time Plus is a perfect example of that.
June 23, 2008 — 8:29 pm