Another problem with banks is that your banker will be much less likely to negotiate for terms and interest rates because of the loophole. Your banker will show you their rate sheets and which loans are available, and your choice is pretty much take it or leave it. Your Bank may seem like a convenient way of refinancing your mortgage loan; however, Banks have secret when it comes to disclosing information about their fees and markup. Now you might be asking yourself how RESPA factors into this. Banks exploit the loopholes in RESPA to make their loans seem more affordable with the fees and closing costs; however, they hit you with undisclosed SRP markup on your interest rate. After closing your bank will turn around and sell your loan on the secondary market for a profit. The mortgage you take out from the bank is funded entirely by the bank and pooled together with their other loans. If you are not familiar with RESPA, it is the Real Estate Settlement Procedures Act that protects borrowers in the United Sates by setting guidelines for disclosure. Banks fund their loans with their own money before selling the mortgage on the secondary market. Banks know that loans with above market interest rates bring them a premium profit at the homeowner’s expense. Your bank doesn’t do this collecting the interest from payment you send in every month; banks make the majority of their profits selling loans on the secondary market. If you are in the process of refinancing your mortgage loan you might be considering a bank loan to get the job done. Here are several reasons why you should never take out a mortgage loan from your bank. Banks are different from traditional mortgage originators because they close on loans in their own name. If you are in the process of refinancing your home mortgage and are considering your bank, there are several things you need to know before making an expensive mistake. If you are not familiar with RESPA, it is the Real Estate Settlement Procedures Act that protects borrowers in the United Sates by setting guidelines for disclosure. Banks make the majority of their profits selling mortgage loans to investors on the secondary market; mortgages with above market interest rates give them a premium profit. Banks are exempt from RESPA laws due to a loophole created by the banking lobby. The bank knows the wholesale mortgage rate you would have qualified for in a competitive market; however, banks build Service Release Premium into their rate sheets. Banks do this because they will receive an additional two points, or 2% of the loan balance, when the mortgage is sold on the secondary market. Your bank is not legally required to disclose anything beyond the Annual Percentage Rate of your mortgage. In addition to having fewer choices, your bank is much less likely to negotiate over interest rates and fees. Because banks fund their loans with the bank’s money, many people mistakenly think taking out a mortgage from the bank or credit union is going to be cheaper than taking out a retail mortgage loan. Your banker wants you to pay the highest mortgage rate possible so the bank makes the most money selling your loan on the secondary market. There are pros and cons with any type of mortgage lender and if you aren’t careful you will pay too much. It can either resell it at a higher price or rent it out.