Your Chicago Mortgage Guy

Dodd – Frank In Action. A Short Play….

<Phone Ringing>

Your Chicago Mortgage Guy: Hello, this is Joe.

Jim The Borrower: Hi Joe. Good News, we got the property!

YCMG: That's great, congratulations, now it's time to start talking mortgage rates. What price did you agree to and when is your closing date?

JTB: We agreed to $375,000.00 and a closing date of May 31^st. After our last conversation, Jill and I decided to go with the 30 Year Fixed option at 20% down.

YCMG: Perfect. At 20% down, you guy's will avoid Mortgage Insurance. Our 30 Year Fixed today is at 5.00%.

JTB: That sounds about right. We've been looking around and everyone seems to be quoting either 5.00% or 5.125%. What's confusing though, are closing costs. What are your costs?

YCMG: Our standard bank fees here total $1295.00. That's for Origination, Appraisal, Application, Credit and Flood Certs. Today though, I can pick up all of those fees. In fact, I can give you a credit totaling $1500 at a rate of 5.00% today.

JTB: Wow, that's the biggest credit we've been offered so far. What I don't understand though is, why does everyone want to pay my fees?

YCMG: Well, according to the new Dodd-Frank legislation, I cannot make any overage on an interest rate any more. So, to stay competitive I am crediting it back to my borrowers. That's good news for you.

JTB: Yeah, that is great! What are the chances of getting to 4.875%?

YCMG: Good question, we are really close to that today. In fact, we are only off by .05%. If you wanted to pay that as an origination fee, I could get you to 4.875%. That's only $150.00.

JTB: What, seriously? Could I still get the credit?

YCMG: No, if you pay an origination fee, I can't give you an closing cost credit.

JTB: So, it's not $150, it's actually $1650?

YCMG: Yes, I guess that's true.

JTB: And, you probably make less money at 4.875% then as well?

YCMG: No, my employer has to pay me the same, regardless of rate. But, 4.875% is below my 1.00% threshold. That's why I have to chare you the .05% to get to the 1.00% threshold on my rate sheet.

JTB: So where did the credit come from at 5.00%?

YCMG: 5.00% was at 1.5%, so I was giving you the extra .50% back as a credit.

JTB: This is getting confusing. What would you have been quoting me before this new legislation went into effect?

YCMG: Well, seeing as you were shopping rates, I likely would have been quoting you the 4.875%.

JTB: Would I have been paying the extra $150?

YCMG: No. But, that depends on what my competitors would have been offering. It's even possible I would have given you a credit.

JTB: At 4.875%?

YCMG: Yes.

JTB: I thought this legislation was for the consumer? I thought it prevented you from steering me into a higher rate to make more premium?

YCMG: It does, but it also sets a floor because my employer can't pay me less money just because I want to be competitive.

JTB: I don't understand.

YCMG: It gets even better. While you might get a $1500 credit at the higher rate, that will cost you another $6700 over the life of your 30 Year Fixed.

JTB: Who get's that?

YCMG: Fannie Mae and your servicer.

JTB: Wait, I thought this legislation was supposed to protect the consumer from the banking industry?

YCMG: Me too.

 

A Whole Bunch of Stuff

Wow.  This is the worst I have been since I started this.  It's been almost two weeks since I last posted, and I think about it every day.  I find myself with less time that I would like to write this afternoon, but I am forcing myself to get as much out there as I can.  So, here is a bunch of things on my mind.

The Market is heating up.  

I am not just saying that.  I wrote six pre-approval letters last weekend.  As of this afternoon, only two went to contract.  All four of the others were beat out in multiple bids.  Just something to keep in mind as you make your initial offer.

Chicago 2016

I went to a presentation by a gentelmen named Gyata Kimmons of the Chicago 2016 bid committee.  He did a great job.  And, for the record, I am a HUGE proponent of bringing the games here.  I firmly believe that if you aren't thinking big, go home.  I don't even particularly like the Olympics, but I definitely would love to showcase Chicago to the whole world.  Anyway, back to the presentation.  It was interesting listening to some of the questions and even the badgering about where the money is going to come from.  I'm as skeptical as the next person and it struck me, they are selling this thing all wrong.  The city invests Millions into tourism and things like Millenium Park to attract people to our city.  This would leave a permanent mark in terms of upgrades to our infrastructure, not to mention the permanent facilities and programs that would be here for all to enjoy.  They need to sell this thing better or Chicago aint buying it.

Parking Meters

The idea behind parking meters is so that businesses don't have the same cars parked in front of there stores all day.  That's where they came from.  Secondly, the rate of parking garages is astronomical these days, where as, until last week, you could still get a meter in the loop for about a buck an hour.  So, now all of the people who have parked in these spaces as if they own them and pour quarters in the meters are up in arms.  Boo, freaking hoo.  Take a bus or pay for the garages like the rest of us.  Sorry, had to get that out.

Interest Rates

A common question I get these days is, "Do you think they will get any lower?"  How do you answer that?  If I say yes, and they go to 6.75%, like they did last summer, where does that leave me?  Loan officers are always antsy to lock you in, regardless of whether rates are at 6% or 5% for one simple reason.  While they might get a little lower, they will definitely, positively, go higher.

Sorry for the gap.  I'll be back soon!

Joe Burke

Your Chicago Mortgage Guy

773-742-6707

joe@yourchicagomortgageguy.com