home buyer/borrower seeking FHA loan originator in L.A.

frinj · Joined: 04 Sep 2008 Posts: 3

I am looking for a loan broker to originate an FHA (3% down) purchase loan for me and my fiance. We plan to purchase a home around $450k in the near future in the San Fernando Valley (Los Angeles, CA). We have not settled on a specific home yet.

I have started dealing with an FHA loan broker who agreed to handle this for 1% of the loan amount INCLUSIVE of the yield spread premium. Thus, if there is no YSP, I pay 1% origination fee. If there is a YSP, then the origination fee is reduced by that amount. If the YSP exceeds 1% of the loan amount, then there is no origination fee, the broker takes 1% of the YSP and the balance of the YSP is credited toward my closing costs. There are also no additional broker fees (I can tell the difference between loan broker and lender fees). So the bottom line is, his gross profit on the deal would be exactly 1% of the loan amount.

I am now shopping around for a better deal. I have good credit (FICO around 750), six figure income and I previously worked in escrow and do not need any education or explanations about the loan process. So I think my loan origination should be a breeze, and could be profitably handled by some one for less than 1% of the loan amount.

I am sending this e-mail to multiple FHA originators to see if anyone wants to offer a better deal. As far as I can tell, you all provide the same product. The rate is whatever it is on the day I lock. Even if you work with different lenders who may offer different rates on the same day, I have no way of investigating or verifying that to see whose lender offers better rates. Nothing personal, but from where I'm sitting you are all fungible and the only criteria I have to pick a loan broker is the cost of his/her services.

If you can offer a better deal, feel free to e-mail me at krm27@aol.com. I will also try to check back on here, but cannot guarantee how frequently that will be. If you think my post shows some fundamental flaw in my reasoning, I'm also open to hearing about that. I certainly can make mistakes.

Thanks.

krm27@aol.com

m2c · Joined: 03 Aug 2005 Posts: 937

General theory is fine – a $4,500 loan payday even with a broker split to flush. One the other hand you’re on the left coast and so have to “pay up”.

Devil is in the details. What makes you think you’ll know the YSP? It’s a lot easier to close yourself and even raise the question of “what’s that funny number on the HUD 1?”
Need a back up plan. Even looking at wholesale rate sheets might not work. Some have “off sheet” SRPs.

Don’t see why any broker wouldn’t take you up on your office since, personally, I think you’re overpaying for what appears to be a slam-dunk FHA. On the other hand, I know you CA guys pay a heavy price for looking at those brown hills. One son had a “funny” rate but after his employer threw in 2 points, it became what I considered reasonable relative to MBS pricing. Another had such a far out quote that I told him I’d take the chance on licensing and do a single loan out there if the broker didn’t “get real”. All of a sudden the broker got a “special deal” since his company was “top tier” with Wells. Yea, sure. At least you know the ropes but you still could get sliced and diced. Surprised you don’t have a contact whom you trust. Even given the high cost of living in CA, I think $3K to $3,500 is more reasonable but from what I’ve seen on CA pricing, LOs make much more per deal than that.

frinj · Joined: 04 Sep 2008 Posts: 3

As I mentioned above, I previously worked as an escrow officer. I know how to read a HUD. I also know that any broker rebate / YSP must be shown on there by law (assuming it is paid to an independent broker).

My understanding is the SRP goes to the lender, not the broker. Obviously, a lender has an incentive to charge the highest rate the market will bear. I do not see that the SRP changes the equation.

Anyway, in theory, lenders want to charge the highest rate possible, but must compete for borrowers and so market forces govern the rate. In practice, inexperienced borrowers are not good or efficient at shopping around, comparing lender rates. Optimally, loan brokers fill the niche between lender and borrower, being versed in what rates are reasonable in the present market, and being able to efficiently shop a borrower around to multiple lenders (don't get me started on brokers who funnel all loans to one broker).

In this admittedly idealistic model, the broker's incentive is to find the lowest possible rate for the client because his fee is not tied to how high the rate is, and his main concern is making the borrower happy so he gets repeat / referral business. The YSP wrecks this model by giving brokers a financial incentive to lock the highest rate they can talk their client into, only tempered by concerns over generating repeat or referral business, or concern they might kill a deal if the rate is simply too high for the client to bear.

I recognize that is an overly simplistic model, but the bottom line is, I feel my best chance of not getting screwed on the rate is to use an independent broker who shops loans to multiple lenders and who agrees in writing to forego any YSP. If he wants to break the law and try hiding the YSP hoping I won't find out and sue, that's a risk I'm willing to take (I don't think it's really very likely, anyway).

On the other hand, I do not see where the SRP gives an independent broker any incentive contrary to the interests of his client, which is my main concern. I guess there could be kickback mechanisms of which I am ignorant, but I can't know or control everything.

2809.blanche · Joined: 13 Nov 2008 Posts: 5

As in this thread where some good replies i will post my question here too.
I am planing to buy a house in Hawaii, so I was checking out some homes for sale in Honolulu and found some nice offers.
So i was thinking of taking a loan of $200k. What could be the prospective interest rates for this loan at this point in time?