It really gets my goat when I see statements on the internet that are intended to lead the consumer to believe that someone or some institution is better than someone else…especially if the comment that is being spewed seems misleading to me.
Just a few moments ago on Twitter, a mortgage originator from Bank of America posted:
Bank of America DOES NOT CHARGE OVERAGES/POINTS to close Home Loans. Building trust with our customers is #1!
Her “tweet” also included a link to an article from Jack Guttentag which has me a bit riled and I’ll probably address soon in a separate post. [see update below].
Bank of America has changed their compensation program for their mortgage originators. It’s my understanding the mortgage originators are rewarded based on the volumes they originate. (I have serious concerns on how this is better for the consumer). This will continue to happen with banks and I believe that DFI is in the process of trying to do the same with mortgage originators who are licensed in Washington State. A consumer might assume that due to the tweet above, they’re paying less for a mortgage rate and perhaps should select this mortgage originator and/or the bank she works for.
I decided to check out Bank of America’s website to price a rate based on the same criteria I used this morning. Their rate for a 30 year fixed mortgage in Seattle was not only 0.125% higher in fees, it’s also 0.125% higher in RATE than what I quoted hours ago.
This clearly states 1.125% in points to be paid for a 30 year fixed at 4.875%. (click on image for a larger picture).
UPDATE: Here’s Jack Guttentag’s definition of an overage, per the article the Bank of America mortgage originator tweeted about:
It is the difference between the price a lender posts with its loan officers — which is the price the lender expects to receive — and the price the loan officer charges the borrower. If the posted price is 5 percent and zero points, for example, and the loan officer charges the borrower 5 percent and half of a point, the half-point is the overage
Perhaps it’s an overage only if the mortgage originator is compensated the gain? What if it’s the bank who’s gaining the overage–is it okay to have the consumer pay more then? Banks are…well…banking it.
Consumers need to continue to be aware and to be responsible for their personal financial interest.