Lenders taking Advantage of consumers —- No More!!! - By: Andrew Bloom, Posted on: 2007-02-03

Is there waaayyyyy too much money being made in the mortgage business —- at your expense?

My name is Andrew Bloom and I have been referred to as the mortgage expert. Does this mean that I know absolutely everything? No! In fact the lending world changes at break neck speed, making it very difficult to stay on top of it all. With 20 years experience though I know that some things never change. One thing is Greed. Everyone involved in the real estate / mortgage business wants to earn millions of dollars — that’s why they got into the business. Of course every dollar earned is at someone elses expense.

It doesn’t have to be that way though. There ARE things the average consumer can do to not get taken advantage of. But, a change is needed. A good analogy that I thought of to explain the current situation and what can be done about it has to do with Doctors, Lawyers, & Scientists.

You may think this is a bit of a stretch, but you’ll see it’s eerily right on. You see there is a problem with the whole “Lending Business”. Real estate too for that matter. The basic fundamental problem that exists is the amount of money you must pay in order to receive these services. I’m only going to deal with the mortgage side of the equation in this article. I mean, let’s get real…. $7,000 to $12,000 in compensation to the lender for providing you a loan? If this is OK for you then there really is no sense in reading the rest of this article. For those who are “with me” on this subject keep reading.

The way that I see it is Doctors treat symptoms, Lawyers fight over the correct way symptoms are treated and Scientists cure the disease. Presuming that paying a lending entity $5,000, $7,000 or $10,000 for the simple task of providing a loan is the disease then …..

The Doctors (who only treat the symptoms) can be likened to:

1. Watch Dog Groups: These people always champion the poor and downtrodden, which is a necessary function in todays world. When it comes to mortgages they help to loosen regulations to allow for easier access to money in the form of home loans. Their main function is to make sure that people of all walks of life are treated similarly and fairly Their interest is in minimizing the disease…. aka “treating the symptoms”.

2. Individuals: These people like to “blow the whistle”. They like to think of themselves as champions however most of the time they are a little un-informed. Their actions tend to put pressure on elected officials to “do something”. They can be invaluable though in recognizing and alerting people about schemes or fraud. They are the first alert for emerging symptoms not yet officially recognized.

3. Media: Hey, they can only report the facts… right? Although I do believe that they should devote a lot more time and resources in reporting the “good” within society and innovative business ideas and concepts that help people. The minutia of reports and statistics are revealed to the general public in this manner. Their function is to reveal the symptoms to the general public and comment on what others are doing about it.

The Lawyers:

1. Regulatory bodies: They are usually mandated by law to listen to the individuals…. really all the “Doctors”. They adopt standards and procedures to minimize the disease.

2. Elected Officials: They pass the legislation proposed by the regulatory bodies. More importantly they are the figure head for “righting the wrong”. They also try to minimize the disease.

3. Lawyers themselves: They are the ones holding the switch. Ready to smite anyone who engages in deceptive tactics (well. as long as it pays). Of course they are the enforcers of policy…. so in effect they insist upon the disease being held to close tolerances.

The Scientists:
These are the poeple that figure out how to actually cure the disease. But where are they in the business world? Well, it’s a Free Market Economy so in theory the cure must come from within. In other words the very perpetrators of the disease must also be the ones who provide the cure. What a strange system indeed. Stranger still is that it actually works.

Currently there is a quiet revolution taking place. One where compensation to a lender is not dictated by a percentage of a loan amount. What some companies are trying to inform the public of is that a mortgage is a product just like anything else. And, as a product it should have a general “value” associated with it.

So, the Scientist in this whole equation is the lender that will raise their hand and say…. “I’ll provide you a loan in exchange for “x” dollars —- a set fee.”

I must say, this is the most brilliant idea. Literally, it will solve all the problems —- This one simple sentence will actually cure the disease. Just how will it accomplish this?

The truth of the matter is lenders make more money for giving you worse terms. To be simplistic about it a lender will make a lot more money giving you a 7% rate than a 6.5% rate. I STRESS this is simplistic, there are soo many ways for a lender to make the terms of your loan slightly worse on several different fronts for the purpose of gaining more revenue in the deal. The Lawyers know this (elected officials, regualtors and lawyers themselves) but are powerless to do anything significant about it. About all that they can do is impose “limits” to compensation. Remember, this is a Free Market Economy — Government can’t tell Business how much they can make.

By limiting the amount of compensation the terms will improve, it won’t be possible to “take advantage” of anyone, Doctors will be actual mortgage companies offering varying levels of service for a set price. Lawyers will only have to keep vigilance over scams and schemes that always pop up. But, who will the Scientists be then? Who cares — maybe Free, Do-It-Yourself mortgages. We all have to push to get there though.

I would urge everyone to visit Free Loan Advice which can be found at http://www.freeloanadvice.net to get their FREE copy of “The Ultimate Mortgage Shopping Guide”. This informative guide will show you the correct way to shop for a mortgage. Yeah, yeah, you’ve probably heard that before… but I’m not kidding. If you just know ONE thing — you will guarantee yourself of getting the absolute best deal on a mortgage — regardless of type of mortgage, interest rate or anything else you can think of.

Take it from a mortgage expert.

Article Source: http://www.southerncaliforniarealestateagent.com/submit-real-estate-articles

With over 20 years experience in real estate / mortgages, Andrew Bloom has agreed to reveal the ONE true way to get the best deal. Get the FREE "Ultimate Mortgage Shopping Guide" found at the Spam-Free site www.freeloanadvice.net You are free to re-print this article but only if the resource box remains intact. Copyright 2007 andrew bloom

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