ill generally charge the seller of a home 6%. Both are a lot of money. These people have to advertise, pay rent, buy copiers, fax machines, overhead, staff, supplies, insurance AND they have to make a profit to stay in business. So while it may sound like I'm in favor of these fees --- I'm not.

The time has come to change the model of how people shop for and get a home loan. The question of whether or not the mortgage industry put people into bad loans is absolute garbage. People should seek out advice and use resources such as the one I cited above. It's a ton of money for god's sake. Once someone has decided on the type of loan though they can be taken advantage of and given worse terms for that type of loan all for the sake of the broker making a bigger paycheck.

The Solution:

There is a solution for this as well. There are many facets and features of all but the most straight forward mortgage. It is extremely easy to give someone worse terms without them realizing it. Take for instance the Pay Option Loans cited above. We already know these loans are negatively ammortized. People aren't stupid. But what they may not know is that the broker can jack up the margin to make more rebate. An increased margin will make these loans adjust higher and faster resulting in greater negatives. So people taking out these loans have the potential

Is the lending industry evil? Have they forced bad (some would say predatory) loans on us? Or, have people simply got caught with their hand in the cookie jar? The debate goes on and will reach it's peak in the next couple of years as foreclosure rates continue to increase. Who is right? Let's break it down a little to find out.

When discussing this issue there are really three separate and distinct forces at work. They are the Lender, the Broker (or retail arm of the lender), and of course the Borrower. Let's take a quick look at each of the three.

The Lender: Lending of course is all about making money. Loaning dollars to someone that needs it and expecting a rate of return for it. In order to loan money to the millions of homeowners that we have, lenders depend upon investors to buy the notes so that more cash is freed up for the lender to loan. The investors of course want to earn a high rate of return but they also want their investment safe. So, standards are adopted by lenders to mitigate the risk. These standards include all the usual underwriting stuff like credit evaluation, debt to income ratios, property value, etc... The best interest rate and terms are given to the most credit worthy borrowers. Investors in these products make a very safe investment but with relatively low rates of return.

The riskier the loan the higher rate of return the investors expect and demand. So, if money for a home loan is going to be given to someone with a 580 FICO score (which denotes a person who has either very little regard for budgeting and paying bills, or someone who has had an unforseen catostraphic event happen to them which has temporarily prohibited them from paying their bills) then you would naturally expect the investors to demand a very high rate of return. Would YOU loan your money to someone that has exhibited a total disregard for their credit? Probably not.

Some investors are willing to take the risk in providing people with poor credit a home loan. These people should be happy that someone is willing to take a chance on them. If they budget themselves and live within their means they can always get a better loan later as their credit standing improves.

The Borrower: They are the "demand" side of the supply / demand equation. If there didn't exist a lot of people with poor credit trying to buy homes then there would be no demand and consequently lenders wouldn't be offering subprime loans at all. Many times people with good credit take out some of the more exotic loans such as the Pay Option Loans (you know... the 1% advertisements that you see). Why do they do this? Many reasons, sometimes they are buying an investment property and want to keep the payments low until they sell. Whatever the reason these people are playing a financial game. Make no mistake, they understand the risk they are taking on. And, like many people who open an E-Trade account and decide to invest their own money in the stock market --- many times they will fail. They didn't adequately assess the risk.

Other than these people there are a lot of articles being written about Predatory Lending. Essentially predatory lending is when someone is given a loan with terms more unfavorable than what they "could" have really received. HUH? I have got to say something here. I see people shop harder for a roll of paper towels at the grocery store than when taking out a mortgage. Do people really call only 1 lender and take out whatever loan they recommend? Absolutely, it happens a LOT more than anyone thinks. These people quite often are the ones who cry the most when the loan terms change and can no longer afford the payments. We are talking about borrowing 5 times as much as their annual pre-tax salary ---- my opinion is if they don't spend adequate time doing their due diligence for a purchase of that magnitude then I have no pity for them. Individual accountability is waning in our society, but I for one still believe in it.

By the way, there are resources available to people who don't have the time or inclination to perform their due diligence. One such web site is http://www.freeloanadvice.net where you can ask questions and get answers from someone that does not have a paycheck riding on it. In fact as a good starter they will give you a totally Free copy of "The Ultimate Mortgage Shopping Guide".

Even with resources available it is still possible to get "taken". Which is a great segway into.......

The Broker: This could also be the retail arm of a lender --- just because you call Countrywide or Bank of America directly doesn't mean that you will get any better deal than if you went through a local mortgage broker. Although they will say things like "because we are a bank we can get you a better deal". Sorry, just not true. Anyway, while there are a lot of respectable mortage people out there ---- there are probably 3 times (or more) who's only purpose in life is to make as much money as they can. We do live in a capitalist society so I can't exactly fault them for it, but the mere fact that there are currently over 500,000 mortgage professionals in this country means that there may be a little too much money flowing in the business.

Through Federal and State laws and regualtions the absolute most that a broker can make off a transaction is 5% and in many areas less. Remember, a realtor will generally charge the seller of a home 6%. Both are a lot of money. These people have to advertise, pay rent, buy copiers, fax machines, overhead, staff, supplies, insurance AND they have to make a profit to stay in business. So while it may sound like I'm in favor of these fees --- I'm not.

The time has come to change the model of how people shop for and get a home loan. The question of whether or not the mortgage industry put people into bad loans is absolute garbage. People should seek out advice and use resources such as the one I cited above. It's a ton of money for god's sake. Once someone has decided on the type of loan though they can be taken advantage of and given worse terms for that type of loan all for the sake of the broker making a bigger paycheck.

The Solution:

There is a solution for this as well. There are many facets and features of all but the most straight forward mortgage. It is extremely easy to give someone worse terms without them realizing it. Take for instance the Pay Option Loans cited above. We already know these loans are negatively ammortized. People aren't stupid. But what they may not know is that the broker can jack up the margin to make more rebate. An increased margin will make these loans adjust higher and faster resulting in greater negatives. So people taking out these loans have the potential

rate of return the investors expect and demand. So, if money for a home loan is going to be given to someone with a 580 FICO score (which denotes a person who has either very little regard for budgeting and paying bills, or someone who has had an unforseen catostraphic event happen to them which has temporarily prohibited them from paying their bills) then you would naturally expect the investors to demand a very high rate of return. Would YOU loan your money to someone that has exhibited a total disregard for their credit? Probably not.

Some investors are willing to take the risk in providing people with poor credit a home loan. These people should be happy that someone is willing to take a chance on them. If they budget themselves and live within their means they can always get a better loan later as their credit standing improves.

The Borrower: They are the "demand" side of the supply / demand equation. If there didn't exist a lot of people with poor credit trying to buy homes then there would be no demand and consequently lenders wouldn't be offering subprime loans at all. Many times people with good credit take out some of the more exotic loans such as the Pay Option Loans (you know... the 1% advertisements that you see). Why do they do this? Many reasons, sometimes they are buying an investment property and want to keep the payments low until they sell. Whatever the reason these people are playing a financial game. Make no mistake, they understand the risk they are taking on. And, like many people who open an E-Trade account and decide to invest their own money in the stock market --- many times they will fail. They didn't adequately assess the risk.

Other than these people there are a lot of articles being written about Predatory Lending. Essentially predatory lending is when someone is given a loan with terms more unfavorable than what they "could" have really received. HUH? I have got to say something here. I see people shop harder for a roll of paper towels at the grocery store than when taking out a mortgage. Do people really call only 1 lender and take out whatever loan they recommend? Absolutely, it happens a LOT more than anyone thinks. These people quite often are the ones who cry the most when the loan terms change and can no longer afford the payments. We are talking about borrowing 5 times as much as their annual pre-tax salary ---- my opinion is if they don't spend adequate time doing their due diligence for a purchase of that magnitude then I have no pity for them. Individual accountability is waning in our society, but I for one still believe in it.

By the way, there are resources available to people who don't have the time or inclination to perform their due diligence. One such web site is http://www.freeloanadvice.net where you can ask questions and get answers from someone that does not have a paycheck riding on it. In fact as a good starter they will give you a totally Free copy of "The Ultimate Mortgage Shopping Guide".

Even with resources available it is still possible to get "taken". Which is a great segway into.......

The Broker: This could also be the retail arm of a lender --- just because you call Countrywide or Bank of America directly doesn't mean that you will get any better deal than if you went through a local mortgage broker. Although they will say things like "because we are a bank we can get you a better deal". Sorry, just not true. Anyway, while there are a lot of respectable mortage people out there ---- there are probably 3 times (or more) who's only purpose in life is to make as much money as they can. We do live in a capitalist society so I can't exactly fault them for it, but the mere fact that there are currently over 500,000 mortgage professionals in this country means that there may be a little too much money flowing in the business.

Through Federal and State laws and regualtions the absolute most that a broker can make off a transaction is 5% and in many areas less. Remember, a realtor will generally charge the seller of a home 6%. Both are a lot of money. These people have to advertise, pay rent, buy copiers, fax machines, overhead, staff, supplies, insurance AND they have to make a profit to stay in business. So while it may sound like I'm in favor of these fees --- I'm not.

The time has come to change the model of how people shop for and get a home loan. The question of whether or not the mortgage industry put people into bad loans is absolute garbage. People should seek out advice and use resources such as the one I cited above. It's a ton of money for god's sake. Once someone has decided on the type of loan though they can be taken advantage of and given worse terms for that type of loan all for the sake of the broker making a bigger paycheck.

The Solution:

There is a solution for this as well. There are many facets and features of all but the most straight forward mortgage. It is extremely easy to give someone worse terms without them realizing it. Take for instance the Pay Option Loans cited above. We already know these loans are negatively ammortized. People aren't stupid. But what they may not know is that the broker can jack up the margin to make more rebate. An increased margin will make these loans adjust higher and faster resulting in greater negatives. So people taking out these loans have the potential

ow until they sell. Whatever the reason these people are playing a financial game. Make no mistake, they understand the risk they are taking on. And, like many people who open an E-Trade account and decide to invest their own money in the stock market --- many times they will fail. They didn't adequately assess the risk.

Other than these people there are a lot of articles being written about Predatory Lending. Essentially predatory lending is when someone is given a loan with terms more unfavorable than what they "could" have really received. HUH? I have got to say something here. I see people shop harder for a roll of paper towels at the grocery store than when taking out a mortgage. Do people really call only 1 lender and take out whatever loan they recommend? Absolutely, it happens a LOT more than anyone thinks. These people quite often are the ones who cry the most when the loan terms change and can no longer afford the payments. We are talking about borrowing 5 times as much as their annual pre-tax salary ---- my opinion is if they don't spend adequate time doing their due diligence for a purchase of that magnitude then I have no pity for them. Individual accountability is waning in our society, but I for one still believe in it.

By the way, there are resources available to people who don't have the time or inclination to perform their due diligence. One such web site is http://www.freeloanadvice.net where you can ask questions and get answers from someone that does not have a paycheck riding on it. In fact as a good starter they will give you a totally Free copy of "The Ultimate Mortgage Shopping Guide".

Even with resources available it is still possible to get "taken". Which is a great segway into.......

The Broker: This could also be the retail arm of a lender --- just because you call Countrywide or Bank of America directly doesn't mean that you will get any better deal than if you went through a local mortgage broker. Although they will say things like "because we are a bank we can get you a better deal". Sorry, just not true. Anyway, while there are a lot of respectable mortage people out there ---- there are probably 3 times (or more) who's only purpose in life is to make as much money as they can. We do live in a capitalist society so I can't exactly fault them for it, but the mere fact that there are currently over 500,000 mortgage professionals in this country means that there may be a little too much money flowing in the business.

Through Federal and State laws and regualtions the absolute most that a broker can make off a transaction is 5% and in many areas less. Remember, a realtor will generally charge the seller of a home 6%. Both are a lot of money. These people have to advertise, pay rent, buy copiers, fax machines, overhead, staff, supplies, insurance AND they have to make a profit to stay in business. So while it may sound like I'm in favor of these fees --- I'm not.

The time has come to change the model of how people shop for and get a home loan. The question of whether or not the mortgage industry put people into bad loans is absolute garbage. People should seek out advice and use resources such as the one I cited above. It's a ton of money for god's sake. Once someone has decided on the type of loan though they can be taken advantage of and given worse terms for that type of loan all for the sake of the broker making a bigger paycheck.

The Solution:

There is a solution for this as well. There are many facets and features of all but the most straight forward mortgage. It is extremely easy to give someone worse terms without them realizing it. Take for instance the Pay Option Loans cited above. We already know these loans are negatively ammortized. People aren't stupid. But what they may not know is that the broker can jack up the margin to make more rebate. An increased margin will make these loans adjust higher and faster resulting in greater negatives. So people taking out these loans have the potential

ligence. One such web site is http://www.freeloanadvice.net where you can ask questions and get answers from someone that does not have a paycheck riding on it. In fact as a good starter they will give you a totally Free copy of "The Ultimate Mortgage Shopping Guide".

Even with resources available it is still possible to get "taken". Which is a great segway into.......

The Broker: This could also be the retail arm of a lender --- just because you call Countrywide or Bank of America directly doesn't mean that you will get any better deal than if you went through a local mortgage broker. Although they will say things like "because we are a bank we can get you a better deal". Sorry, just not true. Anyway, while there are a lot of respectable mortage people out there ---- there are probably 3 times (or more) who's only purpose in life is to make as much money as they can. We do live in a capitalist society so I can't exactly fault them for it, but the mere fact that there are currently over 500,000 mortgage professionals in this country means that there may be a little too much money flowing in the business.

Through Federal and State laws and regualtions the absolute most that a broker can make off a transaction is 5% and in many areas less. Remember, a realtor will generally charge the seller of a home 6%. Both are a lot of money. These people have to advertise, pay rent, buy copiers, fax machines, overhead, staff, supplies, insurance AND they have to make a profit to stay in business. So while it may sound like I'm in favor of these fees --- I'm not.

The time has come to change the model of how people shop for and get a home loan. The question of whether or not the mortgage industry put people into bad loans is absolute garbage. People should seek out advice and use resources such as the one I cited above. It's a ton of money for god's sake. Once someone has decided on the type of loan though they can be taken advantage of and given worse terms for that type of loan all for the sake of the broker making a bigger paycheck.

The Solution:

There is a solution for this as well. There are many facets and features of all but the most straight forward mortgage. It is extremely easy to give someone worse terms without them realizing it. Take for instance the Pay Option Loans cited above. We already know these loans are negatively ammortized. People aren't stupid. But what they may not know is that the broker can jack up the margin to make more rebate. An increased margin will make these loans adjust higher and faster resulting in greater negatives. So people taking out these loans have the potential

ill generally charge the seller of a home 6%. Both are a lot of money. These people have to advertise, pay rent, buy copiers, fax machines, overhead, staff, supplies, insurance AND they have to make a profit to stay in business. So while it may sound like I'm in favor of these fees --- I'm not.

The time has come to change the model of how people shop for and get a home loan. The question of whether or not the mortgage industry put people into bad loans is absolute garbage. People should seek out advice and use resources such as the one I cited above. It's a ton of money for god's sake. Once someone has decided on the type of loan though they can be taken advantage of and given worse terms for that type of loan all for the sake of the broker making a bigger paycheck.

The Solution:

There is a solution for this as well. There are many facets and features of all but the most straight forward mortgage. It is extremely easy to give someone worse terms without them realizing it. Take for instance the Pay Option Loans cited above. We already know these loans are negatively ammortized. People aren't stupid. But what they may not know is that the broker can jack up the margin to make more rebate. An increased margin will make these loans adjust higher and faster resulting in greater negatives. So people taking out these loans have the potential to lose a lot more equity because of something that isn't disclosed to them until they sign the final loan documents --- and even then you have to know what to look for. This is all in the name of more money for the broker. Believe me when I say that this is only one small example of deceptive tactics used.

I mentioned a solution and it has nothing to do with increased federal or state legislation. God knows that they try but the fundamental problem is that no legislation can be passed in a free market economy to limit how much money people can make for providing goods or services --- it's left to the market. So, the solution must come from the industry itself. The market must say "I'm willing to pay $X for your services". The ideal solution would be for brokers / lenders to reveal their TOTAL compensation, which is the last thing they want to do.

A FREE solution is available from http://www.freeloanadvice.net This spam-free website is 100% free and will not sell your information to anyone. One feature of this site is what they call the "Rate and Fee Analyzer". This easy to use tool allows people to discover an approximation of just how much a lender / broker is going to make off of your transaction. You can use this advice any which way you want ---- negotiate with your lender for a better deal, don't use the advice --- it's always up to you. "The Ultimate Mortgage Shopping Guide" also found on the site offers some suggestions and ideas as to how much the service of providing mortgages is really worth.

If people would shop for a mortgage in this manner they would ALWAYS get the best deal for any particluar mortgage product. Finally, finding the best interest rates at the best terms are within the reach of everyone.