by Brian Brady
Commercial Real Estate Finance Expert
Structured Debt and Equity
Licensed Real Estate Broker in AL, CA, and FL
Which one of these loans is better?
A- Loan docs at 6.5% with 1 point cost, disclosed at 6.5% with 1 point cost 30 days earlier…OR…
B- Loan docs at 6.5% with 1 point cost, disclosed at 6.25% with 1 point cost, 30 days earlier, but the originating broker negotiated the 1 point cost before application ?
There is more than one correct answer:
If you said A, you appreciate integrity of expertise and execution. You understand that the originating broker stuck her neck out at quote time and delivered on her promise, regardless of the changes in underwriting and market fluctuation. She assumed the interest rate risk and underwriting risk of the loan after reviewing a borrower’s application, supporting documentation, and credit report. She may have earned an extra .5% by properly executing the rate lock (because she subscribes to MBS pricing)
If you said B, you appreciate the integrity of hyper-transparency in lending. While the originating broker may have made some mistakes in lock execution and underwriting analysis, he did act in the borrower’s best interest and collected only what he negotiated.
If you said that neither were acceptable, you probably haven’t had a transaction close in the past 8 months.
Which will you choose as the better customer experience?
Dave Barnes says:
My loan is better.
5%. 15 year, 1/8 point
July 16, 2008 — 9:10 pm
Brian Brady says:
If you got that in 2003, Dave, your originating broker made a lot in YSP
July 16, 2008 — 9:15 pm
Brian Brady says:
That was a dumb answer, Dave (on my part). Who cares what the originating broker made? That’s a damned good loan.
July 16, 2008 — 9:16 pm
David Shafer says:
Brian, I have gone over to “B” recently, but it is more for me than the client. I do think that ultimately the consumer does better when they demonstrate enough understanding of the process to forego the “when banks compete” propaganda and negotiate the “price” up front. Sometimes accepting the devil you are dealing with is better than trying to beat the devil at its own game!
July 17, 2008 — 5:39 am
Thomas Johnson says:
Loans, legislation and sausage- sometimes we are better off not seeing how they are made.
July 17, 2008 — 7:04 am
Dave Barnes says:
Brian,
I got my loan in March 2008.
You know I really wasn’t trying to answer your question, I was making a [unsuccessful] joke.
,dave
July 17, 2008 — 7:16 am
Brian Brady says:
>I was making a [unsuccessful] joke.
I got it, Dave….after I lightened up. That is a great rate. Your originator did a nice job executing the loan.
Love the sausage analogy, Tom
July 17, 2008 — 7:30 am