Bait and Switch is still alive

Well, it just goes to show you, you can't believe everything you read in the newspaper.

After getting a couple of calls last week inquiring about rates, only to have people tell me that they were seeing rates in the "4's", I had to test some ads from Sunday's newspaper. I saw two ads from companies stating that they had a 30 year fixed at 4.375% and one that said they had 4.50%. I acted like a potential client and called each of them to ask about the ad. Here's what I got at the other end of the line.......

Call#1...."I think that was for a 15 year mortgage. That must be a misprint. Let me ask you a couple of questions........"

Call#2...."Our deadline to place the ad is Wednesday and since then, rates have gone up quite a bit. Tell me about your situation......."

Call #3...."We had an ad in the paper?!!"

Needless to say, even with the onslaught of litigation against the mortgage industry, there are still some that like to toddle the line of ethics and decency. I'm starting to think that the Sunday paper is the first place borrowers should go to find companies to rule out when shopping for a mortgage.

In the meantime, if you're "fishing" for a mortgage and get the old "bait and switch", don't be afraid to "cut bait" and find another "spot in the pond" to fish from.

Essential Facts for Today's Market

Essential Facts for Today’s Market
• More than 1000 banks closed in 1930 – three years before the FDIC
was created
Only 14 U.S. banks have been taken over in 2008

• There are 76 million households in the U.S. that own their home
24 million of these homes are free and clear

• There are 52 million homes with mortgages
97.2% of these are not in foreclosure
93.8% of these homes are current on their payments

On a sobering note:
• Over 20% of homeowners with a mortgage owe more than their
home is worth
• 40% of all foreclosures are non-owner occupied

How did we get here?

Sources:
o Wall Street Journal
o Moody’s Economy.com
o RealtyTrac
o NAR
o Forbes

“It’s not your job to understand, it’s my job to be clear”

It’s a phrase that I use at just about every appointment for a mortgage application, especially when the borrower is a first time home buyer. All too often, we take for granted that the person we are speaking to is hearing what we said when in fact, they heard something else. I can’t tell you how many times I’ve spoken to someone shopping for rates and when they told me about a quote that they got from a competitor and I asked “Were there any points with that rate?” The response is usually “Well, they didn’t mention anything, so I assumed that there weren’t any.” Guess what happens when they call back?

Recently, while attending Sunday mass, our deacon told a story of a member of the German Coast Guard who heard a voice shouting out over the intercom, “Mayday, mayday, we’re sinking, we’re sinking.” The German went over to the intercom, pressed a button and replied “Good for you. Vhat are you “sinking” about?”
It’s very important to be clear on what we say and to make sure that if you as a borrower don’t understand what the mortgage originator says, that you aren’t afraid to ask questions. This is the biggest transaction you will ever have in your life. There are no stupid questions. If the mortgage originator doesn’t want to take the time to answer your questions, maybe he or she is not worthy of your business.

In light of recent news about the mortgage industry, it’s more important than ever to ask questions and be perfectly clear on what you are signing. Are there points, and for that matter what are points? Is this a fixed rate or adjustable? If it’s an adjustable, when will it adjust and by how much? What are the total settlement fees? Many times borrowers will ask “What are the closing costs?” A deceptive rep will not tell you about the escrows for taxes and insurance or other items that might not technically be closing costs. One of the forms that you will sign at an application for a mortgage is called a Good Faith Estimate (GFE). Don’t just sign one, get a copy of it. It will come in handy if there are discrepancies at the closing, although, by law, you have the right to review the closing statement (HUD) 24 hours before the closing.

A glossary of many of the terms in the mortgage industry can be found at www.rickmasnyk.com. If you can’t find what you’re looking for there, ask a question. If you don’t, you could be caught “sinking.”

"They've lowered interest rates." Or have "they?"

“They’ve lowered interest rates.” Or have “they?”

“They lowered interest rates.” It’s a phrase you hear from time to time, but who are “they” and what rate has been lowered? “They” are the Federal Open Market Committee (FOMC). Many knew the previous Chairman’s name very well, Alan Greeenspan. Mr. Greenspan retired last year and his successor is Ben Bernanke. Mr. Bernanke is the focus of the FOMC because when the committee makes decisions, such as rate increases or decreases, he is the person making the statement to all of us. The committee is frequently referred to as “the Fed.” The Fed meets at regular intervals during the course of the year, the next meeting being on March 18th (this article was written just prior to that). When the meeting adjourns, a public announcement usually follows, letting us know the condition of our economy and if it deems necessary, a change in interest rates. But telling you what that rate is, is the foundation of this article. The rate that the Fed will adjust is called the Federal Funds Rate. It’s a rate that is used by banks and lending institutions to lend money to other banks and lending institutions, usually overnight. When this key interest rate is lowered, rates that are usually affected almost immediately include Prime, which in turn affects certain credit card and home equity lines of credit, since many are tied into that index.

Many times, when people are shopping for a mortgage, whether to purchase a new home or refinance and existing one, they expect to call their potential mortgage provider and find a decrease in the rate that they’ve been offered by the same amount as a Fed rate cut. That’s not how it works. The Fed funds rate is a short term interest rate. The 30 year fixed mortgage that you are shopping for is a long term interest rate. While history has shown us that there is a better chance than not that those 30 year fixed rates will move in the same direction, there is no direct correlation or guarantee.

In many instances, the rumor mill will create a market that will price in any potential rate change. What that means is that it may be so transparent that the Fed needs to make a move; the market will start adjusting as if the Fed had already done so. If the Fed does, in fact, make an adjustment to the Fed funds rate, the market has already priced it in and there is less of a drastic change to the market. Those who have things like an existing home equity line of credit will see an immediate change to their rate and payment, but those who are watching rates while trying to obtain a new mortgage might not see such a drastic change. Modern technology has made this system work in this manner.
So the next time you hear that “they’ve lowered interest rates”, you’ll know just who “they” are and what “they” did