Mortgage lenders – and mortgage loans – are not “all alike”

Smoke and mirrors. Bait and switch. If you’re a consumer — and who isn’t, really? — these are probably two phrases forever linked in your mind to a poor buying experience you’ve had.

You’re not alone.

People tend to do more research and comparison shopping now, at least before they make an important and costly purchase. But there’s one huge exception to that rule: a home mortgage loan.

“Given all that has happened to our economy over the past few years — and particularly to the real estate market — that really seems to be counterintuitive behavior,” Rick Piette, owner of Las Vegas-based Premier Mortgage Lending, said.

“You would think the old saying, ‘Fool me once, shame on you; fool me twice, shame on me’ would apply. But the truth is that many people continue to look at mortgage loans as either too confusing to understand or think that mortgage companies — and therefore mortgage loans — are all the same.”

Worse yet, they might believe both statements to be accurate.

“Yet neither is true, even more so today than ever before. One reason is the passage of the Dodd-Frank Act. This bill, written by Sen. Christopher Dodd and (U.S.) Rep. Barney Frank in large part to address Wall Street reforms, also includes substantial legislation that affects both mortgage loans and mortgage lenders.”

Changes to the mortgage industry as a result of law, which is designed to provide consumers with multiple financial protections, include:

— Requiring lenders to make the disclosure forms easier to read and understand.

— Eliminating predatory “no qualifying” loans.

— Establishing maximum “debt to income” ratios that borrowers must meet.

These new federal rules also put in place differentiators among banks, mortgage banks and mortgage brokers, Piette said. Mortgage brokers are restricted on the amount of money they can earn on your loan, and that amount must be fully disclosed to the borrower in writing.

The same is not true of banks and mortgage bankers. In fact, those lenders can charge ‘invisible fees’ to borrowers and they don’t even have to tell them about it.

“As a result, when a mortgage lender like Premier offers you a “no fee” mortgage, that’s truly what it is. There are no loan origination, underwriting or document fees to pay — it literally adds up to $0. And more importantly, you’re assured that is completely accurate … by law. You don’t have to just take our word for it because we’re required to disclose to you every penny we earn on your loan.”

Still, Piette revealed that many of his customers ask him, “But my bank/mortgage banker also offers a no-fee mortgage loan. Isn’t that the same thing?”

His reply: “Not necessarily, because they can charge you those ‘invisible fees,’ and you may never even realize it.”

“How? Simply put, they will place a ‘premium price’ on your loan in the form of a higher interest rate, and that’s what allows them to eliminate the fees. But it’s all smoke and mirrors. They’re just moving the charges around on your paperwork to give you the illusion that you’re saving money. Your disclosure may show $0 in fees, but in the long run, that higher interest rate can end up costing you far more than any up-front fees would have.

“Many customers ask me how a mortgage broker like Premier can operate without charging those fees,” Piette said.

“But consider this: That big-name bank and that national mortgage company will have dozens, if not hundreds, of branches, and not all of them are profitable. That equates to big expenses, along with a huge hierarchy of corporate staff.

To use Vegas parlance, it’s sort of like how casinos operate; “the house” always wins and, in this case, it’s the borrowers who pay.

“On the other hand, if you look at the typical mortgage broker, they’re usually small, locally owned companies with limited expenses. That’s how Premier Mortgage Lending functions. We don’t have a huge overhead, and there are only two people who will make money from your loan: the loan officer and the owner. So we’re happy to pass those savings on to our customers in the form of competitive interest rates and our true no-fee mortgage loans.

“At Premier, we’d like to change how consumers shop for a mortgage loan by encouraging them to actually shop around,” Piette recommended. “It’s easier than you mawy think. Go to more than one lender; get a loan estimate from each of them; then compare the fees and the interest rates to make sure you’re getting the best deal.”

For more information about how to shop wisely for your next mortgage loan and to save thousands of dollars, visit Premier’s “Know Before You Owe Nevada” website to view the quick educational videos.