May 20, 2023
A mortgage lender offering the lowest possible prices and the best possible service may nevertheless struggle to establish a market presence. The problem is that the typical prospective borrower doesn’t understand mortgages very well, may be baffled by the complexity of mortgage pricing, and by the multiple options that mortgages offer. With prices changing every day and little opportunity to learn the ropes from multiple transactions, shopping is a daunting process. Trying to compare the prices posted on lender web sites can be an exercise in futility because no two of them provide price data in the same way, and some provide no pricing at all.
The result is that many if not most borrowers don’t even try to shop, selecting the lender recommended by their broker or friend, or the one whose advertisement captured their eye. The selection may be a good one, or it may be a bad one. They are gambling that they won’t be victimized by any of these common market hazards:
- Low-Balling: Luring
borrowers with impossibly-low price quotes, raising the
price after they are hooked.
- Mispricing: Basing a price
quote on assumed low-risk transaction features rather
than the actual features of the transaction.
- Incomplete Pricing: Quoting
the price as rate and points alone, ignoring
fixed-dollar lender fees.
- Lapsed Pricing: Retaining
undated lapsed prices on web sites when they are more
favorable than live prices.
- Name-Lender Price Premium: The
extra charge levied by the largest and best-known
mortgage lenders for the privilege of dealing with them.
- Lock Abuse: Raising the
price on the lock day on the pretext that it is a market
adjustment.
How can a mortgage lender without a name reputation, who doesn’t engage in any of these abusive practices, succeed in the marketplace? By becoming a Certified Network Lender (CNL) on www.mtgprofessor.com. That site prohibits all of the common abuses cited above. In addition, the CNL site provides a tool for optimizing the decision process. I call it CNL Optimization (CNLO) and it is not available anywhere else.
CNLO allows a client to compare total mortgage costs over one or more future periods that they select. Here are a few illustrations of the many comparisons that mortgage borrowers may find useful:
- Borrower wants to compare a 30-year fixed rate with a 5-year adjustable, at stable interest rates and rate worst case, over 5 years and 10 years.
- Borrower wants to compare points of 2, 0 and -2 on a 15-year fixed-rate mortgage, over 5 years and 15 years.
- Borrower wants to compare down payments of 10% and 20% of property value on a 30-year fixed-rate mortgage, over 5 years and 30 years.
CNLs might find that they can use the optimization feature advantageously to market themselves on the site, which they are free to do. There is no advertising charge and no lead fees. I am financing the site from other sources.
Lenders who are interesting in becoming a CNL can email Jack Guttentag at jguttentag@mtgprofessor.com
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