RISMEDIA, Jan. 8, 2008-For the last four years Americas Watchdog has been vocal about double standards that exist in the U.S. mortgage industry. Because of these double standards, Americas Watchdog estimates that 9 out of 10 current U.S. homeowners pay a higher monthly mortgage payment than what they could have, or should have received when they financed or refinanced their home.

A “yield spread premium” is a kick back that banks or mortgage lenders receive for inflating a consumer’s interest rate on a home loan. According to Americas Watchdog, “mortgage brokers have to disclose this kickback to consumers, but banks and mortgage bankers are exempt from this disclosure requirement”. Also known as a rebate; according to Americas Watchdog, “yield spread premiums have a whole lot to do with the current US real estate disaster. Had U.S. consumers actually been able to see what their bank, or mortgage banker was making off their mortgage transaction, or how much it increased their monthly mortgage payment, most consumers never would have agreed to do the mortgage in the first place.”

According to Americas Watchdog and its National Mortgage Complaint Center, “the U.S. Congress and consecutive White House Administrations have failed to require banks, mortgage bankers and home builders to disclose the yield spread premium kick back, because these business groups are some of the largest campaign donors to members of Congress, the U.S. Senate, and consecutive White House Administrations”. Americas Watchdog added, “if most citizens want to know why we have an epic real estate disaster in the U.S., one needs look no further than Washington D.C. and an army of paid lobbyists to see how it happened”. Americas Watchdog went on to say, “Wall Street is also complicit in the U.S. mortgage disaster because most of the biggest investment bankers, and financial advisers sold US pension funds garbage mortgage loan portfolios, that now could literally bankrupt many of our nation’s pension funds.”

So how bad is the mortgage yield spread premium kick back issue? According to the National Mortgage Complaint Center, “it’s so bad that only 1 out of 100 consumers even know what it is. Even worse, on mortgage broker transactions, where the broker is required to disclose the yield spread premium kick back, only 2 percent of all consumers even know what it was, or how it affected their monthly mortgage payment.”

On mortgage loans or refinances from a bank or mortgage banker there is no requirement to even disclose the kickback, even though like mortgage brokers, they get these kick backs too. Americas Watchdog’s President estimates “the average U.S. homeowner pays about $125 more per month, because a bank, mortgage banker or home builder failed to mention that they received thousands of dollars for inflating an unsuspecting consumer’s interest rate over the best interest rates available. In the end an unsuspecting consumer simply ends up with a much higher monthly mortgage payment”.

So what immediate federal reforms are needed with respect to U.S mortgages/home loans?

1. Mortgage brokers, banks, mortgage bankers and home builders acting as mortgage lenders, should all be required to disclose to the consumer the yield spread premium kick back they are getting for inflating the borrowers interest rate, & what difference this will make in the borrowers monthly mortgage payment.

2. Banks, mortgage bankers and home builders acting as mortgage lenders should be required to disclose the “service release premium” (SRP) they get for selling a consumers mortgage to a loan servicer. A SRP is typically $1500 to $3000, and the home loan borrower should see this fee up front, in order to fully understand what the lender is actually making on the mortgage transaction.

3. According to the group, it should be illegal for banks, mortgage bankers or home builders to be set up phony title insurance companies, and then resell the title insurance policy to a title insurance company for pennies on the dollar. The National Mortgage Complaint Center has proof national home builders are deeply involved in this scheme.

According to the group, “it’s an election year and voters need to see how their Congress person or US Senator participated in this disaster. A bribe from special interest group is still a bribe, and millions of U.S. homeowners have been cheated, gouged and many may now lose their home.”

If a homeowner or home buyer intends to finance or refinance a home loan in 2008, the National Mortgage Complaint Center is encouraging all consumers to call its national toll free number for the name of a honest mortgage lender that can help them with a conventional, FHA or VA mortgage.

For more information, visit http://HomeOwnersConsumerCenter.com.

 

2005

Taking Out The Garbage-San Francisco Chronicle July 2005

TAKING OUT THE GARBAGE
The average mortgage borrower pays $1,250 in junk fees. Here's how to identify them -- and maybe not pay them at all By Lew Sichelman

Special to The Chronicle

Lew Sichelman, Special to The Chronicle

Sunday, July 10, 2005

Most people facing surgery wouldn't go under the knife without first seeking a second opinion. After all, an operation can be a life-altering event.

Buying a house also is a major episode in people's lives. Often it is the largest investment most of us will ever make. And now there's a place you can turn to for a second opinion about your mortgage, another set of eyes to look over the lender's charges to make sure they are fair and reasonable -- before you sign on the dotted line.

Is such scrutiny necessary?

Absolutely, according to Thomas Martin of the National Mortgage Complaint Center in Seattle, who says borrowers pay $1,250 more on average in closing costs than necessary.

Martin, who has been reviewing loan documents for about a half-dozen years on behalf of consumers and class-action attorneys, says 3 out of every 4 borrowers are charged more than their loan officers had told them they would be.

"On an average day," he said, "I look at maybe 15 HUD-1s," the industry term for the government-proscribed form most lenders use to list the various settlement charges borrowers are required to pay. "Every time I think I've seen it all, a new trick or angle pops up, It's really discouraging."

Stephen O'Connor, vice president of government affairs at the Mortgage Bankers Association in Washington, would not dispute Martin's findings, saying that he couldn't comment until he reviewed the settlement sheets and "looked at all the factors."

But he did say the research "underscores the need" for the mortgage reform proposals long advocated by the Department of Housing and Urban Development.

"One of the reasons the White House is calling for a package of closing costs at a guaranteed price is so that consumers can shop fees as well as rates," he said. In the latest sample of 1,347 loans, Martin's Justice & Integrity Project found that the typical application fee was $177. Yet some borrowers were hit for as much a $650, almost four times the average.

Half of all borrowers also were charged a document preparation fee averaging $254. But in at least one instance, a borrower was charged $475. Also, 1 out of 3 borrowers was required to pay a funding fee, typically of $71. But Martin found at least one who paid $275, again almost four times the average.

Lenders have always padded their bottom lines to some degree with these and other junk, or garbage, fees. But everybody who should know better -- real estate agents and title representatives, in particular, but federal and state regulators, too -- has tended to look the other way. After all, nobody wants to be the one to blow the deal.

But during the past few years, Martin says, the degree to which borrowers have been cheated or overcharged with duplicative or needless fees has grown to epidemic proportions.

Because the flood of easy-to-originate refinance loans has all but dried up, he reasons, many lenders have been forced to try to squeeze every dollar they can out of consumers who seek more labor-intensive purchase-money mortgages.

"They're trying to make each deal more profitable to keep their doors open," Martin said.

To protect yourself, you should go over the good faith estimate of anticipated closing costs that your lender is required to give you within three days of applying for a mortgage. That is, if you get one.

Even though the good faith estimate is required by federal law, Martin's research has found that some don't see the document until a few days or hours before closing. Others don't see it until they sit down at the settlement table. Some have told him they never saw one at all.

In a yearlong study completed in 2004, Martin found that only 1 in 4 borrowers ever received this all-important document.

Unfortunately, the time to unearth overcharges and make sure you don't have to pay more than the going rate or perhaps not pay them at all is as soon after you receive your estimate as possible. So if you don't receive one within the allotted time limit, call your lender and demand that one be sent right away.

"Don't wait until closing day" to challenge unnecessary fees, Martin said. "That's what most people do. We all tend to put things off until the last minute. It's still not too late if you do -- if you are prepared to walk away from the deal.

"The problem is most folks show up at closing with the moving van already loaded, just itching to get into their new places, so waiting until the moment of truth is, indeed, too late."

If you don't feel competent to divine what's fair and what's not, Martin's firm will do it for you. For $35, the National Mortgage Complaint Center (www.americaswatchdog.com) will run your good faith estimate through its system and determine whether you are being overcharged and by how much.

Is it worth it? Jim Lowman of Baltimore says it is. The complaint center "was instrumental in helping me save over $2,000 in uncalled for mortgage fees before I closed on my loan," he said, "That $35 was the best investment I ever made."

Martin not only looks for duplicate and excessive fees, line by line, but also looks for terms and conditions you might not be aware of, such as prepayment penalties and undisclosed or hidden charges the lender that is funding your loan might be paying the mortgage broker that originates the loan.

These behind-the-back payments are known as yield-spread premiums. Of the 1,000-plus loans he studied in his most recent survey, 97 percent of the borrowers had no idea the broker received extra compensation, Martin says.

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How to take out the garbage fees

Anyone who protests junk fees should do so in writing. A phone call won't do, warns Thomas Martin of the National Mortgage Complaint Center.

"Write a letter and ask the lender to explain the charges or rescind them, and request that the lender's response be in writing, too," Martin advised. "Everything should be writing -- your letter, the response letter and any offer to lower or eliminate the fees -- so you can have a record when you arrive at settlement."

If you aren't satisfied, don't be afraid to walk away from the loan and go elsewhere, even if you've already anted up $300 to $400 for an appraisal and credit report.

Martin says the very purpose of making borrowers pay these fees in advance is to prevent them from taking their business to a rival. To protect yourself, Martin says you should insist on paying for the appraisal and credit report at closing.

If you pay in advance and decide to leave, he says, demand copies. After all, you paid for them, so they are rightfully yours..

 

 

December 14, 2005

 

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How to Prevent Excessive Loan Fees
by Lew Sichelman

 

Whether you are looking to finance a new house or refinance the one you're already in, you can protect yourself from being overcharged by following this list of "dos and don'ts" from the National Mortgage Complaint Center, a for-profit company which inspects loan documents for unnecessary and duplicative lender fees prior to closing. Do: Check out any lender with whom you are considering doing business. Check with your local better business bureau, consumer affairs agency and the state agency which supervises the mortgage business. Find out if any complaints have been lodged against them, the nature of the complaints and how they were resolved. Ask each lender to give you a quote that includes not only the interest rate but also all the fees associated with the mortgage. And make the request before allowing them to run your credit report. You should be honest about how good or bad your credit history is, but you should not have to pay for a credit report or anything else in advance of obtaining a quote and actually making a formal application for a mortgage. Remind the lender that he is required by law to provide a Truth in Lending statement and a Good Faith Estimate of your closing costs within three days of applying for the loan. Don't just remind the lender, though, but also inform him that you expect him to comply with these federal regulations. No excuses. Confirm in writing whether you will be paying the broker twice, once in the form of an origination fee and again in the form of a "yield spread premium." YSPs are back-end fees which are paid by the funding lender to the broker for landing customers willing to pay a higher interest rate. There are reasons why a borrower might be willing to pay more. You might want to roll the closing costs into the loan amount, for example, or you might want to borrow more than the house is actually worth. But you also have a right to know if the broker is double-dipping. According to Thomas Martin, president of the National Mortgage Complaint Center, "yield spread premiums are the number one source of overcharges in the mortgage industry." Also confirm whether or not the loan you are seeking comes with a prepayment penalty for paying off the mortgage early, typically within the first three years. If the lender is unwilling to make either of these two disclosures in writing, Martin strongly suggests that you "find another mortgage lender." Have NMCC or some other reliable but also independent third party review the loan documents for possible overcharges or unjustified fees. The complaint center charges $45 for a narrative report detailing the fees it finds excessive. Don't: Do not be swayed by slick TV and radio ads. Some may be from legitimate lenders, but many are from companies which act as nothing more than middlemen who charge lenders for sending them "leads." Do your own homework. According to Martin, "These middlemen frequently get huge fees for sending the borrower to the most expensive lenders, with the net result being, you end up paying more money." Do not be fooled by offers that sound too good to be true. If it sounds too good to be true, it usually isn't true at all. Do not sign any papers in which the blanks are not completely filled in or crossed out. And don't be talked into fibbing on your loan application by someone who says "everybody does it." It is illegal to falsify loan documents. Don't go with the builder's in-house lender just because it is convenient to do so. Compare what the builder is offering to the rates and fees other lenders charge. His may or may not be the best deal, and sometimes the builder will sweeten the pot to gain control over the entire transaction. But remember, builders who also act as lenders are earning the same fees -- or maybe higher fees -- that other lenders charge. Martin, who has reviewed thousands of transactions on behalf of borrowers, says some of the highest charges he's seen come from builders acting as mortgage brokers. Do not allow yourself to be forced into closing the loan if you don't understand all the terms or if the terms don't match what you were told in the beginning. Give yourself some leeway – at least several days – between closing on the mortgage and moving into the new house so that if something isn't satisfactory, you won't be stuck with a loaded moving van and a car full of screaming kids waiting to get into their new digs. Realize that both the lender and the seller have just as much incentive to close as you do. So if something isn't right, stick to your guns. Make one of them flinch first.

 

 

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Homeowners Beware Of TV/Internet Mortgage Services and National Mortgage Referral Services (Press Release)

by Mike Adams, the Health Ranger, NaturalNews Editor

According to a just released report by the National Mortgage Complaint Center, homeowners wishing to finance or refinance their homes should consider steering clear of any mortgage service/mortgage referral service that promotes itself on TV or the Internet as a way to get mortgage firms to fight for their business, or as your helpful way to "get rid of debts or credit card bills".

According to the report, in the vast majotity of cases inspected, the lenders that would fight each other to give the homeowner "the best possible deal", were in many cases the very same lenders that have a reputation for gouging or over charging consumers nationwide (one lender that came up very often as a "competitive lender" is under investigation by numerous state attorney general's for gouging consumers). According to Thomas Martin, President of the National Mortgage Complaint Center, "this could be the biggest case of individual or massive fraud in US History, because the homeowner does not know who/what they are dealing with. In many to most cases studied, the Internet mortgage lender/ mortgage referral service appeared to be getting the most money out of the homeowner in fees, or in excessive interest rates". As a solution Martin suggested, "keep it local, deal with people you know, or deal with companies that have been around for a while".

Martin went onto say that his "biggest worry is mortgage firms promoting exotic interest only mortgage products that have starting interest rates as low as 1.5 percent to 2 percent", "or mortgage firms that charge excessive interest rates using the excuse that its better than paying for a huge credit card bill". "At some point reality will set in, and homeowners will realize that they received a mortgage interest rate that was much higher than what they deserved/could have received, the homeowner will realize that the mortgage lender's fees were excessive, and or the homeowner will be put in a position; no longer able to afford his/her mortgage payments". As a result Martin predicts a huge new wave of forclosures starting sometime early next year. While Martin claimed to have identified a few honest companies on the Internet/TV, he indicated that the majority should not be trusted with something as important as a home loan or the largest financial transaction in a typical persons life. At the same time Martin pointed out, "without federal laws that level the disclosure playing field between Mortgage Brokers & Mortgage Bankers regarding a kickback scheme called a yield spread premium", "the consumers have no chance of getting a fair or fully discosed deal". Currently banks and mortgage bankers are not required to disclose a kick back for increasing the borrowers interest rate, while mortgage brokers must disclose it. Martin attributes this un-even playing field to campaign "contributions" from banks & mortgage bankers to the US House & Senate Banking Committee Members along with the current and previous federal administrations.

Martin indicated; "most disturbing of all; the working class, the elderly and or minority groups are the most vulnerable to the Internet mortgage referal service or TV ads that say "we can help you", or "we can send you $10,000 right away to pay off your debts", or "we can get 25,000 banks to fight to the death over your mortgage". According to Martin it would be more correct for these lenders or mortgage referral services to say; "Call us so we can help ourselves to your home's equity, or call us so we or our friends can rob you blind". Martin also expressed a deep concern that these same types of companies force appraisers to come up with unrealistic valuations to qualify a medium, or low income borrower, for a home loan they cannot afford. Martin described this type of appraisal fraud as a "train wreck waiting to happen", and he indicates inflated appraisals are happening at historic levels nationwide.

If you think you have been a victim of being gouged in an TV/Internet mortgage transaction or by a mortgage referral service you should contact the National Mortgage Complaint Center for a thorough review of your documents. The National Mortgage Complaint Center web site is located at http://NationalMortgageComplaintCenter.Com/.

If you have information as a current or former employee of a mortgage origination TV/Internet operation or a mortgage referral service that took advantage of consumers, or if you are an employee of an appraisal service that was forced to provide false valuations on bank or a mortgage lender's orders, you are also encouraged to contact the National Mortgage Complaint Center.