My Way Lending

If you are in the process of refinancing your home mortgage loan, getting a good deal from a reputable lender is probably at the top of your to-do list. The mortgage industry has suffered a major setback in the United States recently with lenders tightening their standards and cutting corners on loan offerings.

In the midst of the is so-called “credit crisis” how can you be sure that you’re getting a good deal on your mortgage rate and aren’t paying garbage fees to the broker or lender? Here are several tips to help you find the lowest refinance mortgage rates for your home loan when refinancing.

Understanding Mortgage Rates

Mortgage shopping for most people involves collecting rate quotes from a few online lenders or calling a broker out of the phone book. Some people ask for a Good Faith Estimate and compare fees; however, very few people actually understand how mortgage rates are quoted and nearly everyone pays too much for their home loans. What most people don’t understand is the “retail” nature of mortgage interest rates.

Mortgage lenders operate their businesses on a wholesale basis. They do not lend directly to the public but rely on mortgage brokers to resell their loans. There is one exception; nearly every wholesale lender operates a retail division. You might think that you can avoid retail markup on your loan by contacting the lender directly and skipping the mortgage broker…if you try this you’ll be dealing with their retail operation and paying the same markup of your mortgage rate.

Mortgage Refinance Rates

Why are mortgage rates marked up? Like any other retail mortgage refinance rates have been marked up to give a commission to the broker arranging the loan. This markup is called Yield Spread Premium. Understand how Yield Spread Premium works and you can save yourself as much as several thousand dollars every year that you keep the loan.

How does Yield Spread Premium work? When your mortgage broker submitted your loan application they “mark up” your mortgage rate higher than the lender is willing to approve you to get a commission. Your mortgage broker might be telling you that you qualified for a 6.75% mortgage rate; however, what there not telling you is that you could have been approved at 6.25%. The broker marked up your mortgage rate by .50% because the lender pays them a bonus of 1% for every .25% they overcharge you. On a $250,000 loan that bonus is $5,000 on top of whatever origination fee you agree to pay for their services.

What does this .5% markup mean for your monthly payment amount? If you had refinanced with the mortgage rate you deserve at 6.25% your monthly payment would be approximately $1500 on a 30 year fixed rate mortgage. Dial that up to 6.5% and you’re paying an extra $960 every year just to give your mortgage broker a bonus.

There is good news for homeowners that do their homework before refinancing. You can avoid paying this unnecessary markup of your mortgage interest rate without paying junk fees to the lender and broker with my free mortgage refinancing system. Register today and you’ll get immediate online access to the videos, a list of recommended brokers in your area and everything you need to secure the lowest possible rate when refinancing your home loan.

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The Federal Reserve announced changes to its emergency lending window for financial institutions today.  The changes extend the repayment period for the loans and the duration of the program among others.  The lending window allows banks to borrow from the Fed for short periods of time while putting up securities (such as mortgage backed securities, etc.) as collateral for the loan.  Banks have used this lending window to alleviate the strain on capital exacerbated by the credit crunch.

From Market Watch:

The Federal Reserve, continuing to combat the enormous stresses that have engulfed financial markets, announced Wednesday several steps designed to enhance its emergency lending program for banks and primary dealers.

For banks, the Fed said it would lengthen some of the credit it extends to 84 days. At the moment, the loans have been for 28 days.

For broker dealers that serve as primary dealers of Treasury debt, the Fed said it would introduce auctions of options on $50 billion of loans. The options could be exercised if needed in periods of elevated stress in months to come, such as the end of financial quarters.

The Fed also said it’s officially extending its primary-dealer loan program to the end of January from mid-September. This step had been previously telegraphed by Fed Chairman Ben Bernanke.

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via Ritholtz, via Slate

As Bloomberg reports, the President signed on the line that is dotted, and the housing bill is now officially official.

Bush signed the measure at the White House shortly after 7 a.m., spokesman Tony Fratto said. Treasury Secretary Henry Paulson, Housing and Urban Development Secretary Steve Preston and Federal Housing Administration Director Brian Montgomery were among those present.

Be sure to check out our post from earlier this week on some of the key provisions that will impact homebuyers.