1. A mortgage company is in the business of making loans not being a property manager. All that they like to do is make money by selling mortgage notes to other institutions and making quick cash or by holding onto the note and collecting the interest.

2. If a borrower misses 4 payments in a row the lender has the option to start foreclosure proceedings on the home. It is in the contract you signed with them and they are only doing what the contract says.

3. After you have missed 4 payments the bank holding the mortgage note has not received 4 months of interest on the principle balance they lent you. As an example a loan at $200k at 6% interest would have a principle and interest payment of $!200 a month in which $1000 of that is strictly interest. It sucks seeing that number. So in the 4 months you have missed these payments that’s $4800 that the bank could not relend or use to pay their own bills like salaries to their employees.

4. As soon as the foreclosure starts the bank has to hire people to go out to the property to see what condition it is in and if it needs to brought back up to code. The local county government will have to be contacted to get the previous owners name off of the deed. Then a realtor has to list the property. All of these people do not work for free and now the bank has to dip into their savings to pay these people to hopefully get it sold.

5. Since the bank owns the house out right now they have to do things like cut the grass and pay property taxes on it now too. So really that $1200 payment is lower its probably more like $1500 now with taxes and home owners insurance.

6. So the bank is spending money to just keep the house in working order while they try to sell it. Even if they are to sell it the banks usually undercut all the homes in the area so they can get it off their books. Most banks take a big loss with foreclosures. There is usually a loan that is still over 80% of the value of the home so even if they sell it and make 10% in equity all of the money they missed in monthly payments, taxes, upkeep, realtor fees, paying the next door neighbor kid $15 a week to cut the grass really adds up.

7. The mortage company is also not doing what they intend to do which is do loans and create new business. They are having to spend a lot of time going out and basically clean up the financial disaster that a foreclosure is so they can move on.

8. Put yourself in the banks shoes for a second. A borrower that takes out a $200k loan at 6% will pay $231,676.38 JUST IN INTEREST over the span of 30 years. So this means that you will pay $431,676.38 total over 30 years to pay off your house if you just make your minimum monthly payments. Kind of makes you want to be a bank now huh. Just sit back and watch the checks come rolling in every month for basically working one time.

9. The mortgage company is always going to be the one that is going to get the bad rap in this one. Its so easy to blame the bank but nobody ever said that I should have never taken that loan because I could not afford it.

10. The trickle down starts happening where banks have to start laying people off because you could just not make your payment. This causes jobs to be lost and companies to fold. This also affects your neighbors because now the mortgage company is going to want to sell this property below everybody else’s lowering property values in the neighborhood. The stock market starts tanking and property values drop quickly. Luckily this will never happen because real estate is the safest investment of all time…um…poop.

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The Top 10 Reasons Mortgage Companies Do Not Want You To Foreclose

1. First off mortgage brokers are not bad people. They are just trying to earn a living and have found a way to make a lot of money with very little personal risk. Mortgage brokers get a bad rap sometimes because of a few people that have misled clients. This happens in all industries but is in our faces more recently.

2. A mortgage broker is somebody who is a middle man between banks, credit unions, and investors. They work with so many companies because some have more programs than others or are willing to take a risk on a certain borrower.

3. Mortgage brokers do not lend you money. All that they do is the shopping for you and charge you a premium to do it.

4. If you currently are working with a mortgage broker or have in the past look for a line on the Good Faith Estimate(GFE) where it says Origination Fee or Broker Premium. That $$ number represents what you are paying him to do the work. Guess what, it was not that much work because even though the mortgage broker has connections with 50 different banks they always go to the same 2 or 3 that consistently get the job done for them.

5. This origination fee is usually 1%-2% of the loan, i.e $100,000 x 1% = $1000 commission for them and so on. As you can see this is some good money for basically talking to you for 20 minutes and picking a loan. Most brokers probably close $1.5m-$2m in loans a month = $15k – $40k in commission. Pretty sickening huh.

6. Next time you look at your Good Faith Estimate ask them about the origination fee. They probably won’t know what to say or have some line saying “that’s how we were able to get you a lower interest rate.” In which you could have been given the same rate by the actually bank funding the loan. Interest rates are determined by what happens on the stock market. If you want a lower interest rate than ask your bank what it would cost to get one at that time. You might pay more but it will be less than what you would have paid with the mortgage broker.

7. Ask the mortgage broker about where it says the actual bank such as “Countrywide Home Loans” as being the lender. Ask them that if you would be receiving the same terms (cost, rate, points) etc, if you were to just call Countrywide up. Why would Countrywide charge you that? They wouldn’t. Call the actual lender.

8. Mortgage brokers have been known to use pre-payment penalties with their loans and if you refinance during a 2-3 year time period you would have to pay them a fee up to 6 months of interest. The only way out of this would be to call them and do another loan with them repaying all ofthe origination fees again. The U.S Government has been stepping in lately and is making it illegal to charge a pre-payment penalty. Good job government. Actually doing something right this time.

9. Mortgage brokers were popping up everywhere over the past 5 years and every body was becoming a mortgage broker. It was quick cash and almost none of the states actually had any testing or regulations. With the changes in the mortgage industry many people who were in process with mortgage brokers were never able to close because the broker went out of business or the lender they were going through had their guidelines change and could not fund the loan. This would make the client have to find another lender and go through the entire process again for another 30 days.

10. The housing mess will probably eliminate mortgage brokers because the banks are realizing that they are not going to pay premium for an investment when its actually a liablilty. They have no way to manage their brokers. Its smarter to hire somebody in house, pay them $40k a year to handle checking, savings accounts, loans, etc and give them $250 when a loan closes than to chase brokers around. If they feel like a broker was lying than all the broker has to do is close up shop and thank the bank for closing loans that should have never been closed.

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The Top 10 Reasons You Should Never Get A Mortgage With A Mortgage Broker

1. The money that banks and construction companies borrowed was the cheapest it had every been during the 2002-2005 years. This turned into a lot of cheap money floating around. If there is anything that we have learned is that “Cheap Ain’t Good, and Good Ain’t Cheap.”

2. With all of this cheap money going around mortgage companies could put otherwise unqualified home owners in homes that were twice the size of what they should own because the numbers worked out now. Never mind that their utility bills were going to make up the difference in what a mortgage payment would be.

3. Home builders were now building homes that were way too large for any normal family. Bigger is not always better. Just because you have a family of 4 does not mean you need a 4200 square foot home.

4. With interest rates so low every body turned into a real estate investor. This was bad because most people that are truly real estate investors have money in the bank to pay for the house but use that money to make repairs and in case something happens. This new real estate investor assumed it was ok to finance 100% of everything without having an emergency fund. This is bad business for everybody.

5. Mortgage companies started pushing adjustable loans to get people into homes and informed clients that they would refinance them in the future which means two sales for the mortgage company, not just one. This means more fees since the mortgage brokers do not hold onto the note.

6. If everybody would have just taken a 30 year fixed loan they could have got the lowest interest rate every recorded in mortgage history at around 5%. Rates historically have been in the 8%-12% range. Too many people were short sighted and took the 3 year adjustable loan at 3.75% because it would save them 1.25% in those three years and they would just refinance in 3 years because the mortgage company would do it. Of course they would do it because its more money for them. The mortgage company has not control over rates so many people are having to spend $5000 on closing costs the next time around and now get a rate around 7%. Imagine now if that 3 year ARM makes since.

7. Not everybody needs to be a homeowner even if rates are low. With 100% financing available it put zero risk on the borrowers. Even if they foreclosed on the house all that was ruined was their credit. Who cares about that, its only a piece of paper that financial institutions use. If you pay cash from now on than who cares what your credit score is. The “American Dream” is such a line of crap.

8. Getting rid of 100% financing will make people save up money and they will not want to lose the home and will work to keep it. Nobody wants to lose their home but if they put $10k down and have been making payments it would be a waste to see them lose it and the mortgage note holder keep it.

9. It started to become the thing to wrap in all of your debt, credit cards, car loans, boats, weddings, college loans into the only secured debt you had to save money on your monthly payments. This is bad because if you can’t make the payments on those other things just let them go into collections instead of wrapping them into your house. The $50k of equity you had is gone and now all of those things you rolled into the loan will be paid on over  the next 30 years.

10. Real Estate goes up every year. Um….wait..what. Ha. Looks like there’s a first time for everything. Hope you didn’t buy a home in the last two years even if you did get a deal. More than likely you did not get a deal. If you paid more than what the home was worth in 2001 than you got ripped off.

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The Top 10 Reasons This Mortgage Mess Could Have Been Avoided

1. Your local bank only deals with prime loans. They do not take the risk on risky mortgages mainly because they do not have the additional investors that larger financial institutions have.

2. Your local bank or credit union will more than likely hold onto the mortgage note rather than sell it in bundles like large mortgage companies.

3. Since your local bank or credit union holds onto the note and collects the interest off of the mortgage they are able to offer rates lower than a mortgage broker or correspondant lender. The rates are not that much lower but .125% -.25% over 30 years adds up.

4. If times become tough your local bank has a little bit more flexibility to possibly work with you in trying to redo loans. Whatever happens in the local community will affect them so its better to work something out than to have the bank go under too.

5. You already keep all of your checking and savings accounts there already so they value your business and want to keep you there. This will ensure that you are not a one and done mortgage transaction.

6. A large mortgage broker has no risk involved in doing your loan because they sell the loan within 30 days of closing. What happens is the loan will usually make them a 2% profit. For example a $100k loan x 2% =$2000 revenue for the company. They turn and sell these loans with other loans making a quick profit and getting the mortgage note off of their books so if you default on the loan its not their problem anymore, its whoever bought the loan. So now you have to call up the current mortgage note holder not the original company you went through.

7. Most banks pay their employees a better salary than large mortgage brokers. This entails that they are not trying to steer you into a bad loan or adding more fees into the loan to make a bigger commission.

8. Local banks do not have as many fees as large mortgage brokers. The reason is because they are lending their own money and do not have to work with other companies. You can usually save $250-$500 on fees because they do not have to charge processing fees.

9. A Credit Union by definition is a place where individuals pool their money together and a management team watches that money instead of having to borow from a larger company. What this does is let each other borrow money for a mortgage at a lower rate than what the market is offering. The Credit Union pools all of its members money together to make the loan and holds onto the mortgage note making a nice return for the Credit Union.

10. Even though your local bank is probably owned by a larger holding company you would be supporting local jobs and job creation. The bank will earn interest on your loan which will let them offer favorable interest rates to small business owners. Plus, your local bank has so much rising on the community that it will want to see you enjoy working with them to ensure that you will come back.

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The Top Ten Reasons You Need To Get Your Mortgage From Your Local Bank Or Credit Union