While our basic interest rates have remained low and steady over the past two years (30 year fixed principle and interest loan has been in the low to mid 6% range with zero points), the “pricing adjustments” from the banks have skyrocketed over the past 6-9 months.  The detail of these costs has never been conveyed to the consumer by the media, for whatever reason.  Maybe the overly-vague and generic term of ‘credit crunch’ fits their needs.

These price adjustments, better known “layering” to the banks and to mortgage professionals, adds costs to the borrowers’ loan and/or rate, depending on the category.  Such categories include pricing penalties for: less money down; taking cash out on a refinance; taking an interest only loan; and most punitively—lower credit scores.  The latter is the biggest change we’ve seen, started around the first of the year—and has grown since.

The best analogy I come up with for loans, relative to credit score, is that we used to be a —> Pass or Fail.  Now, it’s like you’re graded from “F to A+.  For example, a 620 score used to get an automated Fannie/Freddie approval all the time, with decent credit variables and 5% down.  Now a 620 score costs the borrower 2.5 points!!!  Or, if it’s built into the rate, today that would be a 3/4% rate penalty to a borrower’s final rate.  Even if you have a 719 Fico score, you are hit with a .5 fee (or 1/4% rate penalty). 

So if you have a $250,000 loan, a 620 score will cost you $6,250; or a rate 3/4% higher—> which is $150 a month higher with this loan amount.  With a 719 credit score, the adds are $1250 loan costs, or a $41 monthly payment bump.   These are for Fannie Mae and Freddie Mac loans, better known as conventional loans.

On FHA (HUD/Govmt 3% down) loans, there are only price hits for scores below 620.  Borrowers with scores ranging from 580—620 can expect pricing hits between 1% to 3%, usually it’s 1%.  Below is the standard Freddie/Fannie (conventional loans) pricing adjustment grid for credit scores.  Keep in mind, this doesn’t show additional adjustments for cash-out, 2nd home/Investment property, interest only, loan size, condo hits, etc

Why are we one of only 8 states where mortgage people are not licensed??? Can you say LOBBYISTS??!!!!!!

Trust me, every mortgage professional I know wants licensing. They want it yesterday, and desire the licens-ing requirements to be difficult and meaningful.

Imagine that, a mortgage broker or banker who must provide fiduciary duty and put the borrower in a loan that is both “reasonable and prudent”. Fiduciary—Reasonable—Prudent. All words that Certified Financial Planners must adhere to.

So who are these lobbyists representing??? Could it be the Countrywide‟s / DiTechs / Quicken Loans of the world?? The answer is yes and then some. Add whoever has a stake in Internet and Call Center mortgage sales. Do you think these entities would want the expense to train their loan representatives, along with the liability for doling out imprudent loans?? Of course not. How can you stay in business by paying your people $200 a loan if they are professional?? You can‟t. So the victim is the consumer!!

How many people have needlessly paid for an appraisal (the call center mortgage people call it a non-refundable „application fee‟) for a loan that could never have been done?? How many people pay unnecessary points on a loan, just to get to the advertised teaser rates that are usually 1% higher than a more responsible loan with zero points or costs?

Did you know that DiTech‟s (GMAC Mortgage by the way) hiring criteria for mortgage professionals is the following:

** High School Diploma or GED Equivalent

** 6 months of public interaction experience on the job

In other words, a high school dropout who‟s worked 6 months at Burger King can do loans!!! No wonder we‟ve gone from one of the most respected industries to “scum of the earth”.

It is estimated that 1/3 of all loans done in Arizona are done by non-licensed mortgage companies. The majorty of which, a mortgage license bill, just killed, would have eliminated those. Bonding mortgage bro-kers, killed in the prior bill, would have cancelled out another 50%. So we go.

Write or call your local State Senator or Congressman and demand licensing, if it moves you to do so. In the meantime, the market is slowly chafing out the deadweight