Home Loan Question

[Woodruff]

Alright, here is the answer I got from the bank guy. They don't care about the interest rate, they don't care about any fees (those are considered "gravy"), they don't care about ANYTHING having to do with the loan other than that I'm doing something....refinancing, buying, selling, modifying...they don't care. Because they'll make money by selling the loan.

Here's the deal (I'm going to make up numbers here). The bank gives me a $150,000 loan for 30 years at 5.25%. They then turn right around and sell that loan to an investor for $175,000. That's it. Then, when I refinance for $125,000 for 27 years at 3.25% three years later, they turn right around again and sell that loan to an investor for $140,000.

The investor cares about the interest rate, but the bank doesn't.

He was surprisingly upfront about it. Basically, he said that we're getting a good deal with the refinancing, and the bank is getting a good deal too.

[PLAYER57832]

Alright, here is the answer I got from the bank guy. They don't care about the interest rate, they don't care about any fees (those are considered "gravy"), they don't care about ANYTHING having to do with the loan other than that I'm doing something....refinancing, buying, selling, modifying...they don't care. Because they'll make money by selling the loan.

Here's the deal (I'm going to make up numbers here). The bank gives me a $150,000 loan for 30 years at 5.25%. They then turn right around and sell that loan to an investor for $175,000. That's it. Then, when I refinance for $125,000 for 27 years at 3.25% three years later, they turn right around again and sell that loan to an investor for $140,000.

The investor cares about the interest rate, but the bank doesn't.

He was surprisingly upfront about it. Basically, he said that we're getting a good deal with the refinancing, and the bank is getting a good deal too.

I don't think he was entirely up front with you. I think there is some recent rules changes out there forcing or making it advantageous for banks to offer better rates to particular groups, including Veterans.

At the same time, be wary. When loands get sold.. the paperwork often does not follow as it should. While a lot of people certainly deserved to be forclosed upon, there was also a percentage who were just plain cheated by bad banks. Something like that happened to my student loans years back.. I wound up paying several thousand more than I should have. And, it was not really lack of knowledge that got me there.. I had some powerful people pulling for me/advising me at the time.

[patches70]

He was surprisingly upfront about it. Basically, he said that we're getting a good deal with the refinancing, and the bank is getting a good deal too.

LOL, that's hilarious. Win win for everyone, right?
That's the kind of shit that got us in some much trouble back in the crash of 2008 you know.

Now woodruff, you may well be a decent credit risk, but the bank is going to take your newly refinanced loan, bundle it up with God knows what other "securities" (of which might not be such a low risk) and sell it off.
It's all good as the they keep trying to reflate that housing bubble. You'll have a nice ride along the way, your equity will grow, hopefully the price of your house will increase (as will the property taxes as reassessment happens) and some investor collecting on the interest you pay along with the other securities bundled up with your loan.

It's all good until the day the deadbeats start defaulting. The bubble pops and the carnage ensues. You lose all equity in your home as the home prices tumble. If it gets bad enough you'll owe more on the house than you could sell it for. The banks however, will get bailed out.

TARP was supposed to fix all that stuff, or so we were told. But, here we are in 2012 and the banks still doing the exact same crap that got us screwed before.

At least it'll take quite a while longer to reflate that housing bubble.....

Anyway, best of luck to you sir.

[Woodruff]

Alright, here is the answer I got from the bank guy. They don't care about the interest rate, they don't care about any fees (those are considered "gravy"), they don't care about ANYTHING having to do with the loan other than that I'm doing something....refinancing, buying, selling, modifying...they don't care. Because they'll make money by selling the loan.

Here's the deal (I'm going to make up numbers here). The bank gives me a $150,000 loan for 30 years at 5.25%. They then turn right around and sell that loan to an investor for $175,000. That's it. Then, when I refinance for $125,000 for 27 years at 3.25% three years later, they turn right around again and sell that loan to an investor for $140,000.

The investor cares about the interest rate, but the bank doesn't.

He was surprisingly upfront about it. Basically, he said that we're getting a good deal with the refinancing, and the bank is getting a good deal too.

I don't think he was entirely up front with you. I think there is some recent rules changes out there forcing or making it advantageous for banks to offer better rates to particular groups, including Veterans.

Oh, it's a specific program that was enacted for veterans, that's true. But that's essentially just the "excuse" to get us to refinance, so they could sell the loan again.

At the same time, be wary. When loands get sold.. the paperwork often does not follow as it should. While a lot of people certainly deserved to be forclosed upon, there was also a percentage who were just plain cheated by bad banks.

Oh, of course. That's just good sense. We keep good records, and I'm not without resources in other ways.

He was surprisingly upfront about it. Basically, he said that we're getting a good deal with the refinancing, and the bank is getting a good deal too.

LOL, that's hilarious. Win win for everyone, right?
That's the kind of shit that got us in some much trouble back in the crash of 2008 you know.

Now woodruff, you may well be a decent credit risk, but the bank is going to take your newly refinanced loan, bundle it up with God knows what other "securities" (of which might not be such a low risk) and sell it off.
It's all good as the they keep trying to reflate that housing bubble. You'll have a nice ride along the way, your equity will grow, hopefully the price of your house will increase (as will the property taxes as reassessment happens) and some investor collecting on the interest you pay along with the other securities bundled up with your loan.

It's all good until the day the deadbeats start defaulting. The bubble pops and the carnage ensues. You lose all equity in your home as the home prices tumble. If it gets bad enough you'll owe more on the house than you could sell it for. The banks however, will get bailed out.

TARP was supposed to fix all that stuff, or so we were told. But, here we are in 2012 and the banks still doing the exact same crap that got us screwed before.

At least it'll take quite a while longer to reflate that housing bubble.....

Anyway, best of luck to you sir.

I don't really disagree with anything you said there. Except that I don't really believe any of it will affect me as per my own home. Short of losing my job (a very unlikely scenario), we simply won't be selling our home. And I won't owe more on it, because it will be paid off. But yes, I do agree with your general rant there.

[Juan_Bottom]

It all sounds legit to me.
And I'm gonna go with "the investor is a national bank" so that my last explanation will be 100%.

[PLAYER57832]

I don't really disagree with anything you said there. Except that I don't really believe any of it will affect me as per my own home. Short of losing my job (a very unlikely scenario), we simply won't be selling our home. And I won't owe more on it, because it will be paid off. But yes, I do agree with your general rant there.

And, though it would take several volumes to detail it all, this is the REAL and true root of nto just the recent mortgage crisis, but also the European debt crisis, rising US debt, etc.

Too much of our system of making money, of making the MOSt money is based upon fictional dealings and trades (llike bundling various mortgages into a "securitized" "product"). The very specifics change constantly (I don't think they can bundle loans the exact way they did before, for example), but new tricks just emerge.

As long as we have a system that is based not upon increasing true productivity, but upon generating money for those at the very top through various financing methods and other assorted "tricks" (hate that description, but the ways they do this are just too many to detail or categorize another way), we will continue to move toward societal failure. Exactly like many, many great societies have done in the past.