In this case the YSP was over $3,800, a hefty chunk of change. When talking to the owner this closing statement, they said:

I didn’t even see it, until you brought it to my attention. Since it was never a direct payment, I must have just glossed over it. Worse thing is, I was really good friends with the mortgage broker, and now that you brought this to my attention, I will never look at them the same way. I thought they got all their fees, but now that I know they got this too… Also, why is the YSP not even in a debit column?

If you are unfamiliar with YSP, you can do some research on it at the YSP wiki

An inherent problem with the Yield spread premium is that it’s anti-capitalistic. Typically, the borrower has no idea or does not completely understand how the broker is potentially compensated on the back end and therefore can’t truly price out the service being provided to the borrower. The definition of capitalism is a willing buyer, knowing all the facts and circumstances surrounding a service the buyer is considering purchasing (including how much the service provider is being compensated) makes a choice to use the service provider. Since the borrower typically has no idea or does not understand that the broker could potentially get paid on the back end, they can’t compare terms between brokers.

With RateWindow.com, that $3,800 would have been a rebate to the consumer. RateWindow adds transparency to the mortgage process and still allows the mortgage broker to make a living by providing their services at a flat rate, honest fee. RateWindow provides the consumer with the ability to see what their YSP is, and choose to obtain a higher rate, and therefore a higher YSP (which is rebated to the consumer), or a lower rate and possibly have to bring money to the table in order to get that rate.

Perhaps we have too short a memory from the glory days of the dot coms when everyone thought that the tech stocks couldn’t go south. In the mortgage arena, borrowers thought that their incomes would always go up, their property values would always go up, their credit scores would go up, their ability to manage their finances would go up and thus everything would be fine. Wall Street obviously felt the same way or they were in it for the quick & big buck hoping that it would work out that way or that Uncle Sam would come and bail them out. Wall Street sent the message to the lender that they had an appetite for higher interest bearing notes (subprime loans & adjustable rate mortgages) and had easy money to loan. The lenders became the messenger boy and the borrower took the bait and now ends up flopping around on the shore without water. Let’s not kill the messenger, but slot them in a significant role to help throw the fish back into the water. (FHA comes to the rescue with higher lending limits)

Everyone who shares in the blame should bear some of the burden. Wall Street should adjust their notes where there would be some loss to the investors which ultimately include a lot of people who own some of these notes in their 401(k)’s, through insurance company portfolios, or pension plans. The mortgage companies should bear some of the loss by lowering interest rates on the loans allowing people to stay in their homes and not putting an overabundance of supply of homes on the market forcing prices down. A lot of borrowers have already shouldered some of the burden by having some of their appreciation evaporate. Also, Wall Street is experiencing some of the blood bath that is now being experienced by the people who were the ultimate lenders (investors in mortgages) in the first place. Peace is sometimes negotiated but in this case the market has placed its demands on those who are now getting slaughtered by too much of a good thing.

Even with the transparency from the lenders to the brokers/bankers there still remains an uneven playing field. Broker/bankers with little volume do not get the pricing breaks that large volume lenders receive thus NOT all bankers/brokers are created equal. Walmart is a classic example of volume discounts and it is not different in mortgage pricing to high volume brokers and bankers. Walmart buys in such huge quantities that the producers of the product are willing to work on a smaller margin of profit. Comparing Walmart to a local store trying to sell the same product would end up being more expensive at the small local store because their initial cost is higher. So it is with mortgages. Lenders make larger margins on small volume mortgage producers and lower margins on higher volume mortgage producers (called mortgage originators).

With all of the above being said there are essentially two layers of transparency, one from the lender to the brokers and bankers (not always equal in pricing) and then from the brokers and bankers to the borrower. The layer that has suffered in the past is the transparency from the brokers and bankers to the borrowers.

We built RateWindow for the consumer. So they can now shop the rates from with full rate disclosure.

First of all, RateWindow™ will run on any website, but we think that RateWindow™ will be put mostly on Wordpress blogs as a plugin. RateWindow™ does not create any database tables in a Wordpress blog, and we will not allow access to the raw mortgage rate information that is pulled due to the possibility of exploitation, but we will allow additional marketing plugins to access RateWindow™ widget.

The process to develop for RateWindow™.

1. Contact us, and let us know about your plugin.
2. We will then give you access to RateWindow™ hooks and details how to connect
3. Once complete, contact us again and we will make sure your plugin is working properly.
4. We will then distribute your plugin along with the RateWindow™ widget.

Possible plugin ideas

• blog posts, news sources, twitter posts
• real estate related information such as foreclosure listings
• the real estate agent listings (we already have this, but if you make a better one, we will include)
• credit information
• mapping, images, videos

Most plugins will only need to access the newsletter that is built into the RateWindow™ application. The owners of the blogs in which RateWindow™ is located (installed) will always want to distribute more and more information, and with the co-branding aspects of RateWindow™, it is a good start to interconnecting Wordpress widgets

http://www.realestateradiousa.com

RateWindow™ is quickly moving from concept to reality. Over the next couple days we will be putting the finishing touches on our flagship product and release it as the first transparent mortgage tool.

For and example of the product, make sure you check out the demo.