Posted on 09/20/2006 6:54:13 AM PDT by Hydroshock
The Durham (N.C.)-based nonprofit Center for Responsible Lending estimated in July, 2001, that predatory mortgage lending is currently costing Americans more than $9.1 billion each year.
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Lenders will argue that each one of these dollars represents a legitimate fee stipulated by a legitimate contract, that they are only viewed as predatory by borrowers who overlooked the fine print in their mortgage.
But ask Ted Janusz, who spent an interim period of his career learning the ins and outs of mortgage brokering as a loan officer in Columbus, Ohio, and he'll admit that what is really going on here is a game of subterfuge being played at the expense of borrowers with low credit ratings.
Confession Time. The strategy of lenders, he learned, is to maintain an uneven playing field with their clients. "The average person only gets a mortgage every seven years. How can you become good at something you do every seven years, especially if you're dealing with somebody who knows all the ins and outs and is doing this several times a day?" he recently told BusinessWeek.com.
After a year of putting up with what he felt was the industry's lack of integrity, Janusz left the business for good. Still, he felt he was privy to information that the public rarely gets to see. He vented his frustrations -- and spilled his guts -- in the 2005 book Kickback: Confessions of a Mortgage Salesman (Insight).
The book details the sophisticated traps lenders set for clients they see as suckers. "If somebody came in wearing cowboy boots and ripped-up jeans, those are the people you took to the cleaners on fees. That was the unwritten rule -- we were looking for people we'd see as having less-than-perfect credit."
Tunnel Vision. Lenders who found a mark would make sure the money was ending up in their pockets mainly through back-end yield spreads, or the so-called Service Release Premium. For example, they would tell the borrowers that they could have a 9% interest rate, but when the paperwork cleared, their low credit rating would force them into an 11% rate -- often without the borrower even knowing it. The resulting dividends, thousands of dollars in each case, fell into the lenders' laps.
In his book, Janusz also highlights an array of common traps lenders use all the time, such as allowing a borrower to see an attractive interest rate offer and letting him think that's the only important consideration in a mortgage negotiation. "You hear companies offer fabulous rates, but what are they paying in closing costs to get them?" Janusz says. "It would be like comparison shopping for cars only looking at the headlights."
He'd be surprised how many millionaires in Texas wear boots and ripped jeans.
Do you really wish to promote one of Julian Bond's outfits?
"Show me just what Mohammed brought that was new, and there you will find things only evil and inhuman, such as his command to spread by the sword the faith he preached." -Manuel II Paleologus
I just hope we don't have to bail them out again....not the dumb individuals..nor the banks that made the stupid loans....
I buy a new car less frequently than that, and from the first moment I walk into a dealership every sales representative on the floor knows they aren't going to screw with me.
BTTT
The dealer tried to screw with me last time with financing. I knew what rate I could get just by writing a check from my home equity line of credit and the dealer had to beat it after I counted tax deductibility. The finance guy ran me through the ringer. He knew I had a maximum rate in mind, but he started out with a high rate loan and I had to say no to each offer. His final offer had a tiny bit better rate than I already had, but it wasn't quite as convenient so I didn't take it.
If someone had no idea what a good rate was he might accept the first offered rate rather than saying "no, No, NO!" with confidence.
I have found the main trick in dealing with banks is simplicity. For a mortgage a 30 year (or 15 year) fixed rate with locked in up front closing costs is what you want. Every added complication just gives more room for the bank to screw you.
The government must once again come and save the ignorant rabble.
"Save me, government, save me!"
I'm shocked, I tell ya!
1. You won't be financing through them (especially if you can get pre-approved through your bank).
2. You won't be insuring the vehicle through anyone but your own insurance company.
3. You won't be including a trade-in on your current vehicle as part of the negotiation.
This allows both the customer and the dealer to negotiate a very simple deal without any gray areas that can be exploited at the last minute.
Yes, I still laugh when I remember how Mr. Fairview and I tortured three mortgage lenders who were competing for our loan. They never intended to compete but we lured them into it. I had one woman loan officer almost in tears the night before the closing was supposed to take place. We feel no guilt; we got a great deal.
I agree with you. I've done all my borrowing through my credit union. Good interest rates, honest disclosure and no exotic loan products. Went through their auto advisor and got a very good deal on a new vehicle, too. All without dealing with finance managers and sales people.
Now when you can get the male loan officer to cry, that is something to savor.
Hey, I bought tickets from a scalper for the Cave at Emptor. When they turned out to be counterfeit, I went to get my money back, but he was long gone.
fyi
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