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rtrefflich
2352 Posts |
 Posted - 05/15/2008 : 11:34:18 PM
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| Just wondering, there are a few commercials I hear on the radio and guys are giving a 6% IR with a 5.875% APR (or something like that), how is that possible? |
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EquitySmart
616 Posts |
Posted - 05/16/2008 : 01:20:18 AM
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| The broker gets enough YSP from the lender to pay ALL settlement costs for the borrower, including lender closing costs (included in the APR) and escrow reserves and title company fees (not included in the APR). For example, suppose the loan has $2000 of lender closing costs and another $2000 of escrow reserves and title company fees - then the broker can credit the borrower $4000 at closing and APR is lower than the interest rate. |
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mettlin
7 Posts |
Posted - 05/16/2008 : 06:18:48 AM
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For an ARM, the APR is based off the initial fixed period, then averaged with the index + margin for the remaining term.
So, if you had a 5yr ARM at 6% based off the 1yr LIBOR (2.9%) with a 2.25% margin, the APR would be lower than the initial fixed rate. This is because you're averaging 6% for 5 years with 5.15% for 25 years. The APR would be about 5.3%.
The other factor which could potentially affect the APR would be if the initial cap didn't allow the rate to fully adjust up or down from the original note rate.
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1003s.com
2904 Posts |
Posted - 05/16/2008 : 06:46:11 AM
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Richard,
IE, A typical brokered loan in a state like IL,
where title costs a very reasonable runs about,
$1600- in hard costs.
300 appraisal /ussually paid COD By borrower
600 lender fees
350 title
150 recording
50 courier
____________________
$1600- Total
So if you are doing a zero cost loan you would
give the borrower a closing credit for $1600-
given all the above.
However, both the title, and the appraisal are
not to be factored into the APR, per RESPA guidlines.
So if when you calculate the APR, you do not check boxes next to
the title and appraisal, the APR will be lower than the EPR.
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monarchdad
1677 Posts |
Posted - 05/16/2008 : 07:22:43 AM
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quote:
Originally posted by mettlin
For an ARM, the APR is based off the initial fixed period, then averaged with the index + margin for the remaining term.
So, if you had a 5yr ARM at 6% based off the 1yr LIBOR (2.9%) with a 2.25% margin, the APR would be lower than the initial fixed rate. This is because you're averaging 6% for 5 years with 5.15% for 25 years. The APR would be about 5.3%.
The other factor which could potentially affect the APR would be if the initial cap didn't allow the rate to fully adjust up or down from the original note rate.
This is the correct answer, has nothing to do with paying fees from YSP.
We know, of course, that any APR given for a ARM loan is going to be very inaccurate.
Pretty good marketing tactic though, the lender that advertises this on KFI radio in LA gives the rate and the lower APR and says to call in for an explanation. Probably generates lots of calls. |
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1003s.com
2904 Posts |
Posted - 05/16/2008 : 07:35:58 AM
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quote:
Originally posted by monarchdad
quote:
Originally posted by mettlin
For an ARM, the APR is based off the initial fixed period, then averaged with the index + margin for the remaining term.
So, if you had a 5yr ARM at 6% based off the 1yr LIBOR (2.9%) with a 2.25% margin, the APR would be lower than the initial fixed rate. This is because you're averaging 6% for 5 years with 5.15% for 25 years. The APR would be about 5.3%.
The other factor which could potentially affect the APR would be if the initial cap didn't allow the rate to fully adjust up or down from the original note rate.
This is the correct answer, has nothing to do with paying fees from YSP.
We know, of course, that any APR given for a ARM loan is going to be very inaccurate.
Pretty good marketing tactic though, the lender that advertises this on KFI radio in LA gives the rate and the lower APR and says to call in for an explanation. Probably generates lots of calls.
What I posted above was correct, and has nothing to do with ARM loans, or slick
ads. The title policy fee and the apprasial fee, may however,
in some cases be subject to RESPA when these types of services are not
performed by an outside party. Below is a link to some case law,
that may add some clarity, to those potential issues.
www.nelsonmullins.com/DocumentDepot/Overview_of_RESPA_and_Digest_of_RESPA_Cases_2006-07.pdf |
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rtrefflich
2352 Posts |
Posted - 05/16/2008 : 08:11:28 AM
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This makes sense to me.
As far as YSP goes, when I keep YSP it is included in the APR but when I credit it back to the borrower is it not factored into the APR?
It is the same guy on KFI that we have all talked about before.
Why would title and appraisal not be factored into the APR? I thought all non-recurring cc would be factored into it and recurring cc (insurance, pre-paid interest, taxes, etc.) would not be factored into it.
Thanks for your help
quote:
Originally posted by monarchdad
quote:
Originally posted by mettlin
For an ARM, the APR is based off the initial fixed period, then averaged with the index + margin for the remaining term.
So, if you had a 5yr ARM at 6% based off the 1yr LIBOR (2.9%) with a 2.25% margin, the APR would be lower than the initial fixed rate. This is because you're averaging 6% for 5 years with 5.15% for 25 years. The APR would be about 5.3%.
The other factor which could potentially affect the APR would be if the initial cap didn't allow the rate to fully adjust up or down from the original note rate.
This is the correct answer, has nothing to do with paying fees from YSP.
We know, of course, that any APR given for a ARM loan is going to be very inaccurate.
Pretty good marketing tactic though, the lender that advertises this on KFI radio in LA gives the rate and the lower APR and says to call in for an explanation. Probably generates lots of calls.
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clarenceworley
3530 Posts |
Posted - 05/16/2008 : 08:18:18 AM
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Most people that got/gave/sold non-retarded margins 5 years ago on 1 year treasury based arms can tell you:
2.75(margin) + 2.11 1 year treasury yield= 4.86% fully indexed rate.
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nowbroker
921 Posts |
Posted - 05/16/2008 : 08:30:13 AM
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Or they could just be lying on the radio ad, but I am sure that is not the case |
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rtrefflich
2352 Posts |
Posted - 05/16/2008 : 08:38:49 AM
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That is my question, if they are lying is there anything to do about it.
I've heard all of these guys talking about their great programs and rates and none of them exist, it's like the car dealer who has one model.
I also heard one of the hosts toting option ARMS two years ago telling people now how he never told people to get those horrible loans. I wish I had some tapes to send to him telling us how great they were.
quote:
Originally posted by nowbroker
Or they could just be lying on the radio ad, but I am sure that is not the case
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1003s.com
2904 Posts |
Posted - 05/16/2008 : 08:43:28 AM
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quote:
Originally posted by rtrefflich
This makes sense to me.
As far as YSP goes, when I keep YSP it is included in the APR but when I credit it back to the borrower is it not factored into the APR?
It is the same guy on KFI that we have all talked about before.
Why would title and appraisal not be factored into the APR? I thought all non-recurring cc would be factored into it and recurring cc (insurance, pre-paid interest, taxes, etc.) would not be factored into it.
Thanks for your help
quote:
Originally posted by monarchdad
quote:
Originally posted by mettlin
For an ARM, the APR is based off the initial fixed period, then averaged with the index + margin for the remaining term.
So, if you had a 5yr ARM at 6% based off the 1yr LIBOR (2.9%) with a 2.25% margin, the APR would be lower than the initial fixed rate. This is because you're averaging 6% for 5 years with 5.15% for 25 years. The APR would be about 5.3%.
The other factor which could potentially affect the APR would be if the initial cap didn't allow the rate to fully adjust up or down from the original note rate.
This is the correct answer, has nothing to do with paying fees from YSP.
We know, of course, that any APR given for a ARM loan is going to be very inaccurate.
Pretty good marketing tactic though, the lender that advertises this on KFI radio in LA gives the rate and the lower APR and says to call in for an explanation. Probably generates lots of calls.
A credit you give the borrower from your YSP, should be factored into the APR.
Appraisal, is exempt from RESPA if performed by any non-affiliated outside party.
Some non-recurring fees appearing on the HUD are required to be calculated into the
APR while others are not. Usually the appraisal and the title policy itself,
would not need to be be included in the APR calculation so those boxes would be unchecked,
if you were using Calyx Point.
However, as noted above, their are some exceptions that would require their
inclusion.
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khoiey
1179 Posts |
Posted - 05/16/2008 : 09:01:57 AM
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Because it has nothing to do with the loan transaction. That's why the title rate and appraisal and I think even credit report aren't belong in PFC box.
quote:
Originally posted by rtrefflich
This makes sense to me.
As far as YSP goes, when I keep YSP it is included in the APR but when I credit it back to the borrower is it not factored into the APR?
It is the same guy on KFI that we have all talked about before.
Why would title and appraisal not be factored into the APR? I thought all non-recurring cc would be factored into it and recurring cc (insurance, pre-paid interest, taxes, etc.) would not be factored into it.
Thanks for your help
quote:
Originally posted by monarchdad
quote:
Originally posted by mettlin
For an ARM, the APR is based off the initial fixed period, then averaged with the index + margin for the remaining term.
So, if you had a 5yr ARM at 6% based off the 1yr LIBOR (2.9%) with a 2.25% margin, the APR would be lower than the initial fixed rate. This is because you're averaging 6% for 5 years with 5.15% for 25 years. The APR would be about 5.3%.
The other factor which could potentially affect the APR would be if the initial cap didn't allow the rate to fully adjust up or down from the original note rate.
This is the correct answer, has nothing to do with paying fees from YSP.
We know, of course, that any APR given for a ARM loan is going to be very inaccurate.
Pretty good marketing tactic though, the lender that advertises this on KFI radio in LA gives the rate and the lower APR and says to call in for an explanation. Probably generates lots of calls.
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ppulatie
2140 Posts |
Posted - 05/16/2008 : 09:26:07 AM
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Guys,
Now you all see why the TIL is so deceptive on ARM's especially.
And how is a client to understand this when most LO's don't even get it?
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rtrefflich
2352 Posts |
Posted - 05/16/2008 : 09:30:47 AM
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I see where you're going. I have never been able to figure out an APR without the computer, my calculations never come up to what the computer says and I have looked all around for the formula but the ones that I have found still cannot help me get the right numbers.
come quote:
Originally posted by ppulatie
Guys,
Now you all see why the TIL is so deceptive on ARM's especially.
And how is a client to understand this when most LO's don't even get it?
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kalee3415
183 Posts |
Posted - 05/16/2008 : 09:35:42 AM
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Right. As long as there is no mark up and they are 3rd party. Additional non APR include a survey, recording fees (except recording of an assignment), flood cert, and doc prep for settlement docs, deed, etc. That is about all of the common non APR's
quote:
Originally posted by khoiey
Because it has nothing to do with the loan transaction. That's why the title rate and appraisal and I think even credit report aren't belong in PFC box.
quote:
Originally posted by rtrefflich
This makes sense to me.
As far as YSP goes, when I keep YSP it is included in the APR but when I credit it back to the borrower is it not factored into the APR?
It is the same guy on KFI that we have all talked about before.
Why would title and appraisal not be factored into the APR? I thought all non-recurring cc would be factored into it and recurring cc (insurance, pre-paid interest, taxes, etc.) would not be factored into it.
Thanks for your help
quote:
Originally posted by monarchdad
quote:
Originally posted by mettlin
For an ARM, the APR is based off the initial fixed period, then averaged with the index + margin for the remaining term.
So, if you had a 5yr ARM at 6% based off the 1yr LIBOR (2.9%) with a 2.25% margin, the APR would be lower than the initial fixed rate. This is because you're averaging 6% for 5 years with 5.15% for 25 years. The APR would be about 5.3%.
The other factor which could potentially affect the APR would be if the initial cap didn't allow the rate to fully adjust up or down from the original note rate.
This is the correct answer, has nothing to do with paying fees from YSP.
We know, of course, that any APR given for a ARM loan is going to be very inaccurate.
Pretty good marketing tactic though, the lender that advertises this on KFI radio in LA gives the rate and the lower APR and says to call in for an explanation. Probably generates lots of calls.
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monarchdad
1677 Posts |
Posted - 05/16/2008 : 10:11:08 AM
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quote:
Originally posted by ppulatie
Guys,
Now you all see why the TIL is so deceptive on ARM's especially.
And how is a client to understand this when most LO's don't even get it?
I've often thought that on an ARM it should be disclosed as an "Estimated" APR but in reality basing it only on the current index makes for even a pi$$ poor estimate. |
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clarenceworley
3530 Posts |
Posted - 05/16/2008 : 10:42:33 AM
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| An ARM should be required to disclose the current fully indexed rate on the application, imo. |
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