Banks should lower mortgage rates and origination fees

Posted Mar 25th 2009 2:10PM by Connie Madon
Filed under: Personal Finance, Housing

Here comes the next big rip off by the banks -- mortgage origination fees. Banks normally charge what is called an "origination fee" -- an upfront payment to the bank supposedly for the paper work involved in doing the paperwork.

Just to give you an example, David Rapport, professor at the University of California Medical School had to pay $3500.00 up front to refinance his mortgage. A year ago, there was no fee! So banks are jumping in the refinancing market and charging outrageous fees just for writing a mortgage. Don't tell me that last year there was no fee and now for some magical reason banks have to charge sky high fees. The mortgage Bankers Association boosted its forecast for 2009 home loan originations by $800 billion to $2.78 trillion. This will give you a sense of the size of the market.

Banks are making out like bandits on home loans. With short term rates around 2%, banks can borrow short term and lend long term and make a killing. Banks started boosting fees three months ago before Freddie Mac (NYSE: FRE) and Fannie Mae (NYSE: FNM) increased their "adverse market delivery charges." (isn't that another whopper?) Who ever heard of "adverse market delivery charges." These guys must sit down all day and figure out ways to rip off the poor home owner.

With a $2.78 trillion dollar pot at stake you can see why banks are refusing to lower their mortgage rates. The Federal Reserve lowered interest rates to near zero for the very purpose of lowering mortgage rates but banks have been fighting the Fed all along. Just holding mortgage rates 1% higher than they should be is a cash cow for the banks.

This brings up another issue. If the banks are writing $2.78 billion of mortgages this year and making hefty profits, why do we need to spend another $1 trillion buying toxic assets?

This is a special plea to Congress to stop gouging the public again.

Do you believe that banks should lower their mortgage rates?

Tags: featured, fnm, FRE, housing, mortages, origination fees, OriginationFees

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Reader Comments (Page 1 of 1)

3-25-2009 @ 2:29PM

Iridium said...

Yes, yes, and yes. Mortgage rates should be at 3.9% and truly they should actually be lower. Also the new round of fee hikes is insane.

Even at 4% a bank will make a 100% return on the investment and 100% profit. A bank should be happy with making $200k on a $200k loan.

Closing costs have doubled since last year. Making it even harder for new buyers to get into houses. The majority of the costs aren't even for anything. They are just made up procedures and phony paper just to pull more upfront.

The banks knew that lower rates would drive massive demand for refis. The prospect of saving $200 or more per month on a mortgage would be enough for people to take it up the *** and pay the outrageous fees.

I really want to buy a house but I don’t want a mortgage. I don’t want it because I know it is the biggest rippoff in the history of man. It is criminal to make someone pay back double the initial principal. It is ludicrous to make them pay that plus $5000 in fees that don’t exist.

3-25-2009 @ 3:08PM

Donovan said...

Banks aren't ripping people off. Banks are committing outright fraud against consumers. Between credit card APR rates, and upfront costs to apply, refinance or obtain a mortgage. Banks are financially screwing over consumers. Banks need to be nationalized. And be made to follow one set of Government imposed legal rules and regulations, in ALL areas of lending.And business practices.

3-26-2009 @ 8:53AM

beachpaul said...

The banks do not wish to lend at less than 5.5-6%. They want to make back the money they lost, at least on paper, as fast as possible. If inflation returns, interest rates will hit double digits like they did in the 1980's. I, along with others, have a standing order to re-finance when rates hit mid 4%. I haven't heard from the broker since last Thanksgiving when I got on the list.