Last week I wrote PART 1 of this story. In that first part I gave my opinion about a very strange phenomena occurring in American business today.

Almost any business that you can think of is ultimately consumer driven. Think of the automotive industry. They continually strive to come up with new designs, better service, enhanced reliability, etc… But, what if they did something different… what if they said “I’ll sell you this car for $30,000, OR I’ll sell you the same car WITHOUT the tires for $35,000?

Do you think I’m being ridiculous? Yeah, I think so too. But yet that’s EXACTLY what’s happening across the board in the home loan business. The WORSE the terms of the loan being given to you the MORE money they make off of the transaction. And yes, I’m throwing down the gauntlet to challenge anyone who says otherwise.

In PART 1 I explained this in a little greater detail. I also provided a solution to this scam. Part 1 can be found here. In essence the solution is for lenders / mortgage companies to offer their services for a set fee. However even if they were to adopt this thinking, current Federal and State laws make it virtually impossible for the consumer to know the truth about how much a lender would make off of them.

The primary “sticking point” is the fact that mortgage brokers are required to disclose their compensation (not just the fees they charge on the “front”, but also the money given to them by the lenders) — but lenders are NOT required to disclose this information.

Big lenders are famous for scamming the public. They use their name and “credibility” to promote loans for a “set-fee”, but what they aren’t telling you (because they don’t have to) is what their cost of money is. I’m telling you — it really is a scam on the highest order.

Back to the solution…..

On a daily basis wholesale lenders publish a rate sheet. This information is only available to their retail division and any brokers or other lenders approved to do business with them. This information is not to be distributed to the general public. Rate sheets show the cost of money.

So, what needs to occurr is our legislators at the Federal and State level must enact legislation that will force EVERYONE to reveal the cost of money. Remember, lenders are not required to disclose that information. I won’t go into it here because I’ll either bore you to tears or you’ll be reading for the next three days but……. this one simple thing will take an act of God to push through congress. The lending industry has a incredible sums of lobbying dollars at work.

Here is what we can do in the mean time……

If you follow my simple 4 step plan, you will GUARANTEE yourself of getting the best possible deal on your next home loan.

1. Sign a contract with your broker or lender. Make sure the contract stipulates EXACTLY how much they will make in TOTAL compensation.

2. Have them send you a Good Faith Estimate (which details all of the fees being charged to you up-front

3. When your interest rate is “Locked in” have them send you a Lock Confirmation that will show exactly how much the lender / broker will make on the “Back-End”.

4. Make sure the escrow company sends you a FINAL HUD-1 SETTLEMENT STATEMENT. This will show exactly to whom every dollar of the transaction went.

That’s it. If a mortgage company or lender enters into a binding contract with you, then they would be absolutely crazy to charge you any more for their services because the potential liability to them would be HUGE. The danger of course get’s back to the Lenders. They could easily say that the cost of money was much higher (because it’s their money to lend they can say whatever they would like).

If you follow my 4 step plan then my recommendation is to STAY AWAY FROM THE BIG LENDERS. First of all they probably WON’T enter into a contract with you. Second, it is EXTREMELY easy for them to hide their compensation.

The next question of course would be — “How much should I allow them to make off of my transaction?”. Stated in another way — what are their services really worth? Look at the resource box for instructions on how to get “The Ultimate Mortgage Shopping Guide” which answers this question and many more. The web site Free Loan Advice.net is a Spam-Free site that is dedicated to the consumer.

Go there now and you will Forever guarantee yourself of getting the best mortgage with the best rate and terms automatically.