How To Read A Wholesale Lender Rate Sheet and Beat Mortgage Banks Brokers At Their Own Game
Below is a MRR and PLR article in category Finance -> subcategory Mortgage.
How to Decipher a Wholesale Lender Rate Sheet and Outsmart Mortgage Banks & Brokers
Summary:
Mortgage banks and brokers often close homebuyers and refinancers at higher rates than necessary, inflating their profits through hidden fees. This article sheds light on these practices, helps you understand wholesale lender rate sheets, and shows you how to beat lenders at their own game.Understanding the Game
Mortgage banks and brokers frequently charge higher rates to homebuyers and refinancers than they deserve, concealing their extra revenue from customers. This hidden overcharge is known as Yield Spread Premium (YSP) for broker-originated loans and Service Release Premium for those from mortgage banks, such as Wells Fargo or Bank of America.
Professor Howell E. Jackson, an expert from Harvard Law School, testified before the Senate Banking Committee in 2002 about the prevalence of YSPs:
> "...the vast majority of borrowers pay yield spread premiums - on the order of 85 to 90 percent of all transactions...these payments constitute the largest source of compensation for mortgage brokers and are imposed on almost all borrowers..."
The government estimates that these practices cost American homeowners $16 billion annually. To avoid being overcharged, you must learn how loans are priced. This article, along with the complete guide found in my ebook, Mortgage Secrets Exposed!, offers valuable insights.
Decoding Rate Sheets
Learning to read Mortgage Bank Rate Sheets can seem intimidating, but it's quite straightforward. Here’s how we do it at Integrity First Mortgage, Inc. in Denver, where understanding these sheets can save you tens of thousands over your lifetime in home financing.
Every day, lenders provide us with rate sheets via internet or fax. We review these several times daily to offer the best rates without falling into the trap of Yield Spread Premium. Unlike other companies, we find it deceptive to increase rates for extra revenue beyond the 1% origination fee.
Let's walk through a sample rate sheet from Ampro Mortgage, dated March 10, 2006, and demonstrate:
Sample Rate Sheet for a 30-Year Fixed Mortgage
| Rate | 15 Day | 30 Day | 45 Day |
|---------|--------|--------|--------|
| 5.750% | 1.350 | 1.475 | 1.600 |
| 5.875% | 0.611 | 0.736 | 0.861 |
| 6.000% | 0.039 | 0.164 | 1.826 |
| 6.125% | (0.392)| (0.267)| (0.142)|
| 6.250% | (0.773)| (0.648)| (0.523)|
| 6.375% | (1.180)| (1.055)| (0.930)|
| 6.500% | (1.623)| (1.498)| (1.373)|
| 6.625% | (2.029)| (1.904)| (1.773)|
| 6.750% | (2.280)| (2.155)| (2.030)|
Setting Your Rate
Using HSH data, we determine the best rate for our borrowers. To earn only a 1.0% origination fee without YSP, we might quote a rate of 6.000%, which costs 0.164% discount, payable to the lender?"not us?"offering a near-par pricing.
For a $200,000 mortgage at 6.000%:
- Cost Calculation: $200,000 x 1.164% = $2,328.00
Common Practices
Unfortunately, many banks and brokers engage in bait-and-switch tactics. They quote low rates to secure applications but adjust them higher by closing, justifying the increase as part of the Good Faith Estimate process. Surveys and exit polls reveal consistent surprises at closing, with the national average interest rate on closed loans being 6.51% according to HSH for the week ending March 10, 2006.
Example Calculation for Others:
For a $200,000 mortgage at 6.500% with YSP:- Cost Calculation: $200,000 x 2.498% = $4,996.00
This overcharging significantly increases the income for each loan.
Protecting Yourself
With the information provided and daily rate sheet updates, you can safeguard against one of the most rampant consumer rip-offs. Good luck!
---
For more detailed guidance, refer to Mortgage Secrets Exposed! and take control of your mortgage process.
You can find the original non-AI version of this article here: How To Read A Wholesale Lender Rate Sheet and Beat Mortgage Banks Brokers At Their Own Game .
You can browse and read all the articles for free. If you want to use them and get PLR and MRR rights, you need to buy the pack. Learn more about this pack of over 100 000 MRR and PLR articles.