Posted by MW/VA on 9/5/08 8:31pm
Msg #263334

High closing costs--how do they get away with it?

I'm feeling bummed out about a signing I did tonight. It was supposedly a "streamline VA loan". I've seen a lot of these advertised lately. Costs were about 14K, and moving borrower from fixed to ARM. I don't see how this kind of thing can still be going on????? How do they convince people this is a good deal for them? I think we've all been there--been at a signing when we want to scream "Don't do it", but certainly can't comment. Just venting to my peers.

Reply by PAW on 9/5/08 8:37pm
Msg #263337

Did you look to see what the costs consistent of?

It certainly may appear to be a high cost, but there may be a few discount points, up-front mortgage insurance, back taxes or even current taxes, impound account setup for payments due in a couple of months, and who knows what else. Studying the HUD may show that $14K isn't that high after all.

Reply by MW/VA on 9/5/08 8:41pm
Msg #263339

Re: Did you look to see what the costs consistent of?

That's exactly right. It still doesn't make economic sense to me to refi. to save maybe a 1/2 percent for 3 years at a cost of $14k.

Reply by JanetK_CA on 9/5/08 8:44pm
Msg #263340

Re: Did you look to see what the costs consistent of?

We can't tell what their circumstances are or what is going on in their lives. We need to be careful about prejudging. Often, we'd likely be right, but ya just never know...

Reply by Carole Breckbill on 9/9/08 1:42pm
Msg #263702

Re: Did you look to see what the costs consistent of?

Had a situation recently where the guy didn't appear to be very well educated but - as is often the case - had a lot of street smarts. When he looked at the cost, the higher interest rate (surprise) and that his monthly payments would be about the same, he just flat out refused to sign. I was happy to say thank you and then leave.

Reply by LynnNC on 9/7/08 9:45am
Msg #263444

Re: Did you look to see what the costs consistent of?

I closed a loan last week with no cash out and over $12,000 in closing costs which included 3 pts total, impounds including FHA insurance, back taxes, no other debts paid off. The borrower went from 6.5 to 6.0% and total monthly payment went down only $3. I pointed out the amount of the loan being paid off, the amount of the new loan and the settlement costs to make sure she knew the figures. The reason that she refinanced was because of current cash flow...she was short cash to pay her mortgage payment...with the loan she did not have to make a payment until November 1 and would get the escrow $$$ back from her current loan.

Reply by MikeC/NY on 9/5/08 9:22pm
Msg #263344

I agree - moving from fixed to ARM seems to make no sense at all. But without knowing the circumstances, how can we know if it really makes sense? Maybe they're planning to sell in a year or two, and the ARM gives them a chance to lower their payments. Maybe they're behind in payments, and the ARM is giving them a chance to save their house (for now).

We don't know, don't need to know, and are not supposed to care one way or the other. That last part can be tough at times.

As for costs, PAW is right. It's not all broker or lender fees, and you can only tell by reviewing the HUD-1. But even if it IS mostly broker or lender fees, we have to go back to the above: don't know the circumstances, don't need to know, and are not supposed to care...

Reply by MW/VA on 9/6/08 10:33am
Msg #263386

I'm experienced & know all that. Sometimes it's hard not to care if you feel the borrower has been "sold" on a loan that is just about a paycheck for the lo/broker. There are desperate times in the mortgage industry, and some will still do anything to make money. This was a situation where the costs were mainly broker fees. I don't cross the line to decide what is good and what isn't. I made it clear that I was venting to my peers only.

Reply by MikeC/NY on 9/6/08 10:21pm
Msg #263428

Understood. I didn't mean to imply that you don't know what you're doing, and apologize if it came across that way. These situations really do suck, and sometimes it's tough to bite your tongue when it looks like the BO is making a huge mistake.

Reply by CF on 9/7/08 8:42am
Msg #263440

The best way that I handle these things....is to stress the 3 day RTC and suggest that the BO have someone else look over it- as I can not give legal advice. If they are totally clueless...then that should give them a hint to have someone else look over it for them.

It does suck to be there and see it going on....I am sure that you did read the HUD and know, exactly, where the $$$ was going!!!! Yes, the others are right that there can be a variety or reasons to do the loan- but you still can make up your own opinion. I know that I have enough "common sense" to offer to myself to understand that some people do get "sold" and it is sad to see!!!!