BluefoxToday blog : Just TRUST ME and Don't Ask Questions

Just TRUST ME and Don't Ask Questions

Unfortunately, there are many ways to fleece a trusting buyer.Trust me I am a credit Union

Who can you trust? Obliviously not the sleazy looking guy pictured but there are others who appear trustworthy who could be picking your pockets.

Most of us, when shopping, search for someone we can trust for good advice and a fair deal. Consequently, there are those who fulfill that need with a trustworthy appearance.  

Often advertisements show them with Trust Symbols: holding a cute child or pet, surrounded by family. 

Some appear trustworthy by company association, like starting a credit union or even better a military credit union.

On Friday, 11/27, I noticed a military federal credit union (FCU) advertising a Zero Point loan for 4.875% with an APR of 4.963% and the FCU would even pay lender fees. 

Hmmmm... on Friday, at that rate, they should be paying their borrower's fees and a signing bonus.

The Zero Point APR seemed high to me so I used my APR calculator to find the fees.

The calculation required a loan amount and there was no loan amount disclosed beside the advertised rate and APR so I scrolled down to their detailed disclosure to see what I could see.  

Below, in lots of small print, the FCU disclosed a $300,000 loan with a rate of 5.000%, 1-Point and an APR of 5.089.   Hmmm... In this example, the APR contained 1 Point but no lender fees or prepaid interest. 

So, based on their small print disclosure I also used a $300,000 loan amount and zero allowance for prepaid interest to find the fees on their Zero point 4.875% Rate.

Wow, based on the advertised Rate and APR, lender fees are a whopping $3,000.  BUT WAIT.... There's more!  Leave us not forget the small matter of 1.75% undisclosed yield spread premium (YSP) that, translated to dollars, is an additional $5,250.  How do I know there is 1.75 Point YSP, you ask.  Since you asked, on Friday, I know of at least two wholesale lenders offering their approved brokers 1.75 YSP on a 4.875% Rate.  If a small, local mortgage broker can find that much YSP then a national FCU should be able to do that or better.

Did I mention that credit unions are not required to disclose yield spread premium?

To recap, let me count the ways this Military Federal Credit Union pissed me off.

  1. Credit Unions are supposed to be Non-Profit clubs which implies their rates and fees will at least be competitive with other lenders. 
  2. A "military" CU implies it is a private club where our military will receive better deals than elsewhere. In reality, this Federal CU is even more expensive than any of the expensive four big banks.
  3. $8,250 is a lot of profit on a $300,000 loan; especially from a company that lulls it's customers into a false sense of security that may prevent their "club members" from aggressively shopping elsewhere.
  4. This CS CU is targeting our young military personnel which is typically an unsophisticated market and that dear readers is a load of BS.
  5. The APR in their small print disclosure failed to include prepaid interest.  Never trust a lender that does not include at least 15 days prepaid interest in their APR when the closing date is unknown. The dollar amount for 15 days interest on a $300,000 loan at 5.000% is $625 and that is a large Whoops at closing.
  6. This Federal CU may disclose prepaid interest in their good faith estimates but I don't know that because a GFE could not be obtained until the borrower completed a loan application... more BS.

The moral of this story?  Let education, facts and figures be your guide... NEVER buy anything based solely on trust.  You may choose a lender because you trust them for one reason or another but do not fail to always verify your trust.

Education is the Consumer's Only Real Protection.

Comment balloon 40 commentsBill Ladewig • December 06 2009 03:46AM

Comments

Bill, excellent post regarding fees that are not clearly identified.  It is surprising to me to find the YSP is often not noticed by agents for their clients and I didn't know that credit unions are not required to disclose them.

Posted by Delete Acct Desert Communities about 9 years ago

Isn't all this YSP supposed to go away the first of the year with that "new" government, consumer friendly guide?

Posted by Carla Muss-Jacobs, RETIRED (RETIRED / State License is Inactive) about 9 years ago

That's why I send my buyers to a broker I trust.  I know she discloses EVERY fee to them and I've always told people the APR is more important than the stated rate.  Sneaky little big hidden fees tick me off too.  Nice explaination of the yield spread premium.

Posted by Tammy Lankford,, Broker GA Lake Sinclair/Eatonton/Milledgeville (Lane Realty Eatonton, GA Lake Sinclair, Milledgeville, 706-485-9668) about 9 years ago

Bill -

I am with you.  I had client get burned by her credit union just this week.

It seems to me credit unions have been abusing their low cost image lately.  That's just my personal take, though.

But your post certainly doesn't surprise me.

Posted by Joel Prince, Hixson/Soddy Real Estate Broker (The Principle Group, Inc) about 9 years ago

Hi Bill, Thank you for this information!  Everytime I come over to your post I learn something new, and I appreciate that! There is a lot more to it than what meets the eye- even in the very small print.

Posted by Mary Douglas, REALTOR, Red Feather Lakes, Colorado (United Country Ponderosa Realty, Red Feather Lakes, Colorado) about 9 years ago

the way some credit unions act is a big scam.

if you go to CUNA, credit union national association, they will refer to the customers as member/owners.

they don't treat you like that though. 

Posted by Jay Beckingham, Seniors ROCK! (Fairway Independent Mortgage Company) about 9 years ago

Military crdit unionis acting like a big rip off.  It is difficult to get the military to not go that way.

Posted by Tim Lorenz, 949 874-2247 (TIM LORENZ - Elite Home Sales Team) about 9 years ago

Hi Bill,  As of January 1 doesn't everyone have to disclose all fees including yield spread?

Posted by Bob Murphy (Keller Williams Realty Consultants) about 9 years ago

What a great post.  Everyone should read this one . . . trust me.  :)  Thanks again for a great post Bill.

Posted by Alexandria Virginia, Real Estate Editor (Featuring Susan Craft, CRS, REALTOR® - McEnearney Associates) about 9 years ago

What a great post.  Everyone should read this one . . . trust me.  :)  Thanks again for a great post Bill.

Posted by Alexandria Virginia, Real Estate Editor (Featuring Susan Craft, CRS, REALTOR® - McEnearney Associates) about 9 years ago

Bill, good post and I have the same questions, on January 1 do all entities loan money have to disclose YSP?

Posted by Janice Roosevelt, OICP ABR, ePRO,Ecobroker ( Keller Williams Brandywine Valley ) about 9 years ago

Bill,

 Great post and points.  I have to say it brought up memories of the Late William Proxmire and his Golden Fleece Awards

Posted by Paul Guenther, Empire West Title- Chandler, AZ (Empire West Title Agency) about 9 years ago

I have usually encouraged buyers to shy away from credit unions for amortgage loan

Posted by Joe Jackson, Clintonville and Central Ohio Real Estate Expert (Keller Williams Capital Partners Realty) about 9 years ago

Hi Susan, most credit unions operate as mortgage bankers or correspondents and are not required to disclose YSP.

Carla, the FDIC has a new rule that will probably go into effect in 2010 that will not allow mortgage brokers to be paid YSP.  Other lender types will still be able to receive YSP which will put mortgage brokers at a sever competitive disadvantage.

Tammy, a trustworthy lender lender is great partner for any Realtor

Joel, it is a shame that some poeple take advantage of their postiion of trust to take advantage.  We just have to be sure to shine the light on them when we catch them.

Thank you Mary.

Jay, there are bad apples in every barrel and it is our job to point them out.

Tim, anyone who rips off our service men and women need to be stoped.

Bob, the way things look mortgage brokers are the only group will not be able to be paid YSP.  It will be business as usual for all other lenders.

Susan, thank you very much.

Janice, only mortgage brokers will be affected. 

Thanks Paul.

Joe, most of the time credit unions and big banks are not as competitive as an aggressive mortgage broker.

Posted by Bill Ladewig, Experience Is Your Advantage (LoanOfficerSchool.com) about 9 years ago

Bill, How disturbing, as it's exhausting sometimes to figure out who to trust. I appreciate your great details and have subscribed for future GURU / straight talk about mortgages.  All the best, Michelle

Posted by Michelle Francis, Realtor, Buckhead Atlanta Homes for Sale & Lease (Tim Francis Realty LLC) about 9 years ago

Thanks for article. We learn a lot from Active Rain Blogs. Best Regards,

Posted by Edward & Celia Maddox, EXPERIENCE & INTEGRITY - WE TAKE THE HIGH ROAD (The Celtic Connection Realty) about 9 years ago

Thanks for article. We learn a lot from Active Rain Blogs. Best Regards,

Posted by Edward & Celia Maddox, EXPERIENCE & INTEGRITY - WE TAKE THE HIGH ROAD (The Celtic Connection Realty) about 9 years ago

At the end of the day the saying , "If it is too good to be true thaen it isn't true ," is probably the way you should view some of these things

Posted by Charlie Ragonesi, Homes - Big Canoe, Jasper, North Georgia Pros (AllMountainRealty.com) about 9 years ago

I agree with the disclosure of YSP.

I don't agree with the fact banks, mortgage bankers and correspondents don't have to disclose their spreds.

I guess it goes to show who has the strongest lobby in Washington DC.

Posted by Mark Watterson, Utah Real Estate about 9 years ago

I bet you opened a few people eyes with this post

Posted by Virginia Tatseos (Stage-Show-Sell) about 9 years ago

Great post.  Folks need to slow down, think for themselves and our government needs an overhaul to make sure we are protected from the "trust me" gangsters.

Posted by Alessandro Columbo (Team Columbo) about 9 years ago

Great post.  Folks need to slow down, think for themselves and our government needs an overhaul to make sure we are protected from the "trust me" gangsters including the government.

Posted by Alessandro Columbo (Team Columbo) about 9 years ago

Michelle, trust can take a while it is something that builds on performance.  My first test is straight answers to my questions.

Edward and Carla, thanks.

Charlie, yup

Mark, that would be big banks and they seem to be making the rules for their legislative flunkies.

Virginia, I hope so.

Alessandro, the best protection is consumer education.   

Posted by Bill Ladewig, Experience Is Your Advantage (LoanOfficerSchool.com) about 9 years ago

Trust and verification... one of my husband's favorite lines! Great advice, especially now.

Posted by Lisa VonBargen, Estes Park Real Estate Photographer (Photography7522) about 9 years ago

Lisa, your husband is a wise man verified by who he married. :o)

Posted by Bill Ladewig, Experience Is Your Advantage (LoanOfficerSchool.com) about 9 years ago

I agree if it sounds to good it probably is.

Posted by Terri Onigkeit, GRI (Keller Williams of Northern Colorado) about 9 years ago

Don't worry folks....our government will take care of everything for us!

Posted by Robert McArtor, Top Listing Agent for Baltimore and Harford County (RE/MAX Components - Fallston Maryland) about 9 years ago

[I know a broker in the Hispanic market who has a picture of himself and the Pope on his office wall.  It turns out the "Pope" is a life size cardboard cutout.]

Oh dear. :)

Great post, Bill. Trust but verify! (and verify first!)

Posted by Candice A. Donofrio, 928-201-4BHC (4242) call/text (Next Wave RE Investments LLC Bullhead City AZ Commercial RE Broker) about 9 years ago

Great Blog!

Posted by Krista Wach (Re/Max Omega | Assistant Manager) about 9 years ago

Hi Bill, Excellent post.  I would naturally assume a CU would be more than competitive for its members !

Posted by Bill Gillhespy, Fort Myers Beach Realtor, Fort Myers Beach Agent - Homes & Condos (16 Sunview Blvd) about 9 years ago

Terri, I have to agree with that.

Robert, you should have added to the end of your comment "just bend over and relax"

Candice, "oh dear" is right.  I went for months being impressed until one of his agents told me about the life sized cutout.  Even after I knew it was fake it looked real.  There are on-line companies that sell the cutouts.

Thanks Krista.

Bill, I made that same assumption until I accidentally found that CU on line and it really pissed me off.  A predator disguised as good guy in an unsophisticated market is like taking candy from a baby.  I think this is the exception because in San Diego we have a couple of aggressive CUs that sometimes give me a run for my money.

Posted by Bill Ladewig, Experience Is Your Advantage (LoanOfficerSchool.com) about 9 years ago

So, it would be safe to say that an educated consumer needs to shop around for the best rate, and ultimately the most trustworthy lender.  Thanks for the post, Bill.  It is an excellent reminder not to rest on our laurels.

Posted by Jane Peters, Connecting you to the L.A. real estate market (Home Jane Realty) about 9 years ago

Bill,

Many a nice facade has something not so nice hidden behind it. It still applies that if it sounds too good to be true, it is. As you say, verify your trust.

Posted by Esko Kiuru about 9 years ago

Excelllent post but I'm not sure I trust it, LOL

Posted by Scott Taylor, REALTOR (Realty Center - Orlando - Ocoee) about 9 years ago

Bill,

You are one great loan officer that knows his stuff!  Thank you so much for blogging this information!  The fine print is where it's at obviously. 

Now I'm wondering which FCU...

Posted by 1 ~Judi & Don Barrett & Chassy Eastep - Integrity, BS Ed, Integrity Real Estate Services -IDABEL OK (Integrity Real Estate Services 118 SE AVE N, Idabel, OK 74745) about 9 years ago

Hi Jane, according to me I think every Realtor should develope a trusted relationship with an experienced mortgage broker with many sources. 

Esko, we need trustworthy associates and we should verify that trust from time to time.

Scott, :o)

Don, thank you very much.

Judi, Wow, thank you so much.  Maybe the point is also, take nothing for granted. 

Posted by Bill Ladewig, Experience Is Your Advantage (LoanOfficerSchool.com) about 9 years ago

Too many people think someone who is not trustworthy looks a certain way, not true, they come in all shapes and sleazes and I've learned the hard way to check before going forward with any transaction. Isn't it a shame we have to do that?! I love this post Bill!

 

Posted by Wanda Kubat-Nerdin - Wanda Can!, So Utah Residential, Referral & Relocation REALTOR (Prado Real Estate South) about 9 years ago

Thanks Wanda, appearances can fool us and I have learned the hard way verify my trust.

Posted by Bill Ladewig, Experience Is Your Advantage (LoanOfficerSchool.com) about 9 years ago

Thanks for the post. It is a good idea to ask friends for a referral when shopping for loan or a home.

Posted by Gita Bantwal, REALTOR,ABR,CRS,SRES,GRI - Bucks County & Philadel (RE/MAX Centre Realtors) about 9 years ago

Bill, tell us how you really feel about that credit union! hee-hee. I LOVE your picture! PERFECT... especially makes me think of what we'll be saying to our clients when the new and improved GFE comes out... you know the one that doesn't give program type, an accurate amount required for closing, and the PITI payment!!! (I'm rolling my eyes wondering how stupidity once again is rampid in the minds of our those who pass legislation these days!)

Posted by Ruth Vogt, 719-592-0855 Apply 24/7 www.ColoradoHomeLender.com (Fairway Independent Mortgage, LLS. Equal Housing Opportunity. Regulated by the Division of Real Estate.) about 9 years ago

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