Banks fall into a special category of mortgage lenders and routinely charge Service Release Premium (SRP) for their loans. The property may be appraised at a much lower price than its current market value. Everyone else in the marketplace (mortgage companies & brokers) is a retail vendor that sells mortgage products for wholesale lenders.
To do this you'll need to enlist the help of an honest, "Upfront" Mortgage Broker. 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. Here are several reasons you should avoid Banks altogether when mortgage refinancing.
Bank mortgage loans are often called “correspondent loans" because after the banker completes your mortgage that bank will immediately turn around and sell it on the secondary market. Once you close on the mortgage the bank will turn around and sell your loan to secondary mortgage market collecting their profit. The problem with taking out a mortgage from your Bank is that they are not required to disclose any of this markup due to loopholes in the Real Estate Settlement Procedures Act. Bank mortgage rate sheets also have Service Release Premium built into their interest rates.
While banks are a convenient way of getting a new mortgage and are much less likely to try and use high pressured sales tactics on you, you are limited to the Bank only mortgage products. A little known loophole in the Real Estate Settlement Procedures Act could cost you thousands of dollars in unnecessary mortgage interest.
Bank originated mortgage loans have the same markup as retail mortgage loans with one distinction. The problem with bank rate sheets is that they already include Service Release Premium and the bank is under no legal obligation to admit it. The secondary market is where investors buy and sell mortgage debt for a profit. The ugly truth about banks comes from the fact that they are exempt from the Real Estate Settlement Procedures Act (RESPA); legislation that protects homeowners from abusive lending practices by requiring mortgage lenders to disclose all fees and markup associated with their loans.
When the mortgage rate is marked up by a bank the markup is called Service Release Premium. Because banks are exempt to all RESPA laws protecting you from this fleecing, you will never know it happened. Banks earn a premium on the secondary market by charging Service Release Premium, and here’s how it works. 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.
For a free copy of "Mortgage Refinancing - What You Need to Know," which teaches strategies to find the best mortgage and save thousands of dollars in the process, visit Refiadvisor.com. Banks make the majority of their profit by selling your home loan to the secondary mortgage market. Fortunately for you, there is a way to spot it. It can either resell it at a higher price or rent it out.
If you are in the process of refinancing your mortgage loan you might be considering a bank loan to get the job done. This is the retail markup of your mortgage interest rate when you borrow from a wholesale lender. Louie Latour specializes in showing homeowners how to avoid costly mortgage mistakes and predatory lenders. The lobby spent millions of dollars romancing Congress to give banks an unfair advantage over their customers.