Mortgage News

Tuesday, December 11, 2007

Example of Why Reading the Fine Print of Websites is Important

You may have heard this... "Big print giveth... little print taketh".

This is important both online and offline and especially for anything you sign.

I took screen shots in case things change on the site after the post. Pictures speak a thousand words, so here you go. I'm sure plenty of you will have something to say about this advertising from Bank of America.

Bank of America launched the No Fee Mortgage program which has been a huge success for them. Here is a screen shot of the site.

Seems welcoming like a great deal.

The Big Print.

No Mortgage Fee's, No Private Mortgage Insurance, Best Value... etc.

Almost too good to be true? I'm sure many people jumped on the opportunity. In fact, from Oct. 18 press release B of A stated... "First mortgage originations rose 27 percent helped by success of No Fee Mortgage Plus, which accounted for 21% of first mortgage productions in the third quarter."

See those tiny blue links or the small text at the bottom... terms of service, clicking link that will get you this.

Little Print Taketh.

Read carefully where I've underlined and you be the judge of if the little print matches the offer of the big print.

Now I'm sure this is simply to protect B of A and I'm sure B of A delivers these loans as you can see from the various Inman news post and history of this loan starting here, then this, and most recently with this.

Additionally, well respected Mr. Guttentag - aka (mortgage professor) did a comparison of this loan to see if there was real savings with the program.

Here were his results...

The results were mixed. In the 11 comparisons I did, Bank of America's prices were lower in five and higher in six.

The loan does exist but not necessarily as expected for the average consumer who simply looks at the big print.

What is also interesting is that the advertising a "no fee loan" was based on a loan that actually had fees associated with it?

Any thoughts or personal experiences regarding big print / little print?

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Saturday, July 21, 2007

Facebook API App Explosion... 8 Mortgage Calculators

As everyone knows, Facebook has exploded with the release of the API. In their developer group there is currently 86,925 members already signed up. Facebook had a competition for apps and the winning programmer and his application has had over 130,000 applications installed in less than a month. This explains why there is talk of it being worth for around 6 billion.

We noticed that there was not any mortgage calculators so we programmed a few a for you to install in your facebook account.

Mortgage Calculator - calculates 10-50 yr mortgages both fully amortized and interest only loans.

Side by Side Mortgage Comparison - calculate payments of up to 4 loans side by side at the same time.

Pay Option ARM Loan Calculator - Displays worst case scenario adjustments

Loan Amortization Schedule Calculator - Creates a monthly amortization schedule.

Adjustable Rate Mortgage Calculator - Displays worst case scenario of adjustments for ARM loans.

Blended Rate Mortgage Calculator - Got two loans? Calculate the "blended mortgage rate" of a first and second mortgage to help you determine if you should have a single mortgage.

Home Buying Monthly Budget Calculator - Thinking of buying a home? This calculator helps you calculate your net income monthly income after cost of living bills and mortgage payments.

Real Estate Investment Calculator - Calculates the monthly equity growth of your real estate investment through price appreciation and mortgage amortization pay-down.

Please try them out and provide us some feedback as to the usefulness of these facebook apps. You can access all of these calculators on or site at

We will be keeping on eye on the growth of these types of apps and the impact of it on the mortgage landscape.

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Tuesday, May 08, 2007

BofA Skews Truth About New Smoke and Mirrors No Fee Mortgage Loan

You may have recently seen news and press releases regarding Bank of America's new "No Fee Mortgage PLUS" program that touts the following..

No Closing Costs and No PMI for loans over 80% LTV at competitive rates.

Yet, Bank of America's website loan disclosures state differently... don't fall for this corporate "bait" as I will prove below.

BofA made some pretty bold claims in it's press release like this...

-- No Private Mortgage Insurance: No Fee Mortgage PLUS eliminates the need
for PMI, which is usually required for a loan-to-value greater than 80
percent. Bank of America enables borrowers to get into their home
without the need to bring 20 percent to the closing table in order to
eliminate PMI, which not only reduces cost but also eliminates anxiety
and uncertainty in the homebuying experience.

News agencies then give millions of dollars in trusted advertising by reporting it like this...

CNN.. " It also won't charge for private mortgage insurance - often required for borrowers who put less than 20 percent down."

Inman News... "but lets them make a down payment as small as 5 percent without having to purchase private mortgage insurance."

Milwaukee Biz Journals... "No Fee Mortgage Plus eliminates application fees, lender fees and the need for private mortgage insurance."

San Diego Source... " It also will not require private mortgage insurance on loans with less than a 20 percent down payment."

Does this sound too good to be true? That's because it is!

The way the loan really works, is that they charge you a "higher then normal" interest rate to pay / subsidize these closing costs that are "not being charged" by BofA. Instead of paying for the fee's out of pocket, you are simply financing them via a higher mortgage interest rate for the entire life of the loan.

Matt from Inman was the closest to getting the truth from BofA as reported in his Inman news piece..

In a conference call with reporters, BofA officials avoided the question of whether they would be recouping those expenses by charging a higher interest rate or points for the loan.

"It's not about interest rates, it's about value," said Floyd Robinson, BofA's president of consumer real estate, when asked whether the loan would carry a higher interest rate. When the loan's elimination of fees, private mortgage insurance and other features are factored in, he said, "We're confident the customer will feel (BofA's no-fee loan is) the best value."

This makes sense if you are keeping the loan for a short amount of time but if you anticipate to keep it for 30 years, it may cost you thousands more. Also, this is nothing new or exclusive... any and all lenders can offer this same mortgage program.

The smoke and mirrors part of this is Bank of America is stating to everyone that it will not charge for PMI but yet... directly on their website mortgage disclosures you will find this:

No Private Mortgage Insurance

There may be an incremental cost for the No Private Mortgage Insurance (PMI) option.

Read the entire BofA disclosure here.

Hmm... there may be a cost? I thought you (Bank of America) said that I won't be charged PMI?

How can companies get away with this smoke and mirrors tactic?

Remember... big print giveth... little print taketh.

Always, start with the fine print.

When shopping for a mortgage the numbers don't lie. Here are some mortgage calculators to help you with your mortgage decision. What does PMI actually cost... here is a PMI calculator.

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Friday, March 02, 2007

Time to Get Rid of the "Pig" from Your Mortgages Back?

As you know, thousands of home buyers over the last few years have used a piggyback mortgage such as a 80/20 or 80/15.

Many of the second mortgages were based on an adjustable rate mortgage indexed on the ever increasing Prime rate.

Over the last 24 months, the prime rate has increased from 5.5% in Feb. of 05 to 8.25% currently. Many of the second mortgages are now fully-indexed at rates well over 10.00% with the first mortgages of 6.5% or higher.


If you have an adjustable rate mortgage you really need to understand what this means. Here is the calculation for fully-indexing a mortgage:

Index + Margin = Mortgage Rate
Index = Prime rate, Treasury Bill, LIBOR, etc
Margin = Arbitrage spread of the mortgage lender. Typically 2.5% - 7.5%.
Index (prime rate - 8.25%) + Margin (say 3.00%) = 11.25% Mortgage Rate.

For some, this may be an excellent opportunity to refinance considering that the effective "blended rate" of their first and second mortgages may be higher than the current mortgage rates of a single loan.

Blended rate is the actual monthly payment costs of both mortgage loans.

Here is an example assuming a $550,000 purchase using a 80/20 piggy back mortgage. View piggyback mortgage calculator.

First Loan: $440,000 at 6.5% = $2,781
Second Loan: $110,000 at 10.0% = $965

So assuming the current jumbo mortgage rate is 6.75% most people would not think of refinancing since the mortgage rate is .25% higher than they are currently paying. But here is why it's important to review your mortgage.

Using this blended rate mortgage calculator, you can see that combined (or blended) mortgage rate is actually: 7.20%

So if you can refinance your existing two mortgages which are 2 years old into a new single loan at say 6.7%, you would actually save .5% a year in mortgage interest on $550,000, which is $2,750 a year or $229 a month.

You would have a few options with this money.

A) You can deposit $229 a month into a savings account like hsbcdirect which is currently paying 6%. $229 a month will compound to a savings account of $16,286 in just 5 years, $37,945 over 10 years and $231,413 over 30 years.

B) You could get a 25 year loan at 6.75% and have monthly payments of $ 3,800 which is only $54 a month more but could save you a 36 months of $3,800 or $136,000 in future mortgage payments.

C) You could use the savings to pay down high rate credit cards.

D) You could support your Starbucks habit of two venti lattes a day.

E) Fund your kids piggy bank.

If you are currently in the above scenario, use the mortgage calculators indicated to determine if you should get rid of the pig and save some bacon.

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