May 22 2007
The undisclosed mortgage difference between banks and mortgage brokers
Bank of America’s new “No Fee” mortgage for new home purchases seems unreal. They mentioned that based on an average loan amount of $200,000, they would be covering approximately $2,000- $3,000 in closing costs, which includes all 3rd party fees. Wow. Did you know mortgage professionals across the country have been doing this for years? The difference is in disclosures.
Large banks such as Bank of America are not required to disclose their yield spread premium on the Settlement Statement or HUD-1. That is, disclosing how the profit they make (which is directly proportionate to the interest rate provided) is only required by mortgage brokers and correspondent lenders.
Is it fair? No. But I look at it this way. As a Mortgage Profssional I always disclose exactly how we get paid, which includes the yield spread premium. Banks are exempt from requiring to tell you and apprarently don’t. The only way to clarify if a no closing costs loan is a good one is to compare. Be careful. Disclosure is everything.
Please make sure that you compare the interest rate they are offering by calling other mortgage professionals. YOu will be surprised to know exactly how they are paying for these fees.Â
Stephen Thaggard