Transparent Wholesale vs Retail Lender Mortgage Rates and Pricing
July 7th, 2008 Categories: Op/Ed
Great question in the form of a comment from a recent post:
I like this, but I don’t see how it is any different than the likes of what Amerisave, e-loan, theratesmart.com are currently doing. Nor what your competitors are doing and have been doing for much longer; Nylx, LenderFlex, etc…
Maybe you can enlighten us to why I would choose your product over a company that is more established and been in the field a lot longer.
Depending on who the company is, the differences range from night and day, to small but vital nuances. Websites and companies that redisplay mortgage rates are ubiquitous, all of them look very similar making it difficult for the average person to tell what the real differences are, who is really showing ‘the real rates’? Overall it’s a losing proposition for the consumer and ethical mortgage professional trying to navigate through the mish-mosh of compromised information being pimped under the guise of ‘trust me’.
First, the most important aspect of ‘how’ we are different rests in RateSpeed’s core value propositions:
- Maintain the integrity and purity of information between the wholesale/correspondent lender and the consumers eyeballs, while keeping the mortgage professional in the middle of the transaction.
- We are not a lender nor do we originate mortgages in any way, shape, form or fashion.
- We do not sell (or buy) leads, period.
- Create an even playing field, win-win environment for consumers and mortgage professionals to negotiate business on.
- Our sole interest is to become the most respected provider of the most authentic, accurate, unaltered, unmanipulated, uninflated mortgage program, rate and pricing data in the marketplace for the consumer through the licensed mortgage professional.
These value propositions allow us to remain a completely objective 3rd party that concentrates on transparent mortgage program, rate and pricing search.
Second, as to why someone should consider RateSpeed over a perceived competitor who has been in business longer, has more experience etc. our back end technology and architecture is extended via an exclusive relationship with a long time, well respected, patent-pending mortgage PPE (program and pricing engine) provider called who has been in business for 5+ years.
On most occasions, running a side by side analysis, using identical submission criteria between a licensed RateSpeed mortgage professional and another ‘mortgage rate website’ will be enough. In other cases some intricate nuances will have to be expounded upon, as they’re not nearly as obvious but just as important.
This will be the first in a series of posts that will attempt to point out the differences between RateSpeed and perceived ‘like services’. Amerisave was chosen first, in the order of the comment above.
Comparison #1: Transparent Wholesale vs Retail Lender
Both scenarios were run on July 5, 2008 at ~2pm pst.
Amerisave is a direct lender who’s primary business is the origination and sale of mortgages.
RateSpeed is a PPE (Program and Pricing Engine) software program that is configured to the broker or bankers existing wholesale or correspondent relevant direct data feeds, and runs consumer front facing on their respective websites. The Broker/Bankers who run RateSpeed on their web/blogsite have no ability to manipulate the information disclosed in the application between the wholesaler providing it and the consumer seeing it. Why the last sentence is important can be evidenced below:
Amerisave Search Criteria
RateSpeed Search Criteria
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Granted our UI needs (and is getting) some much needed make-up, don’t be superficial and instead notice the far deeper quality of information RateSpeed is collecting on behalf of our search engine for subsequent crawling. Better information in = better information out.
The Credit Crunch cliche refers to the far more highly scrutinized nature in which mortgages are approved compared to the not so distant past. Credit scoring, more specifically: what credit scores cause an increase in pricing and higher interest rates, weighs heavier than ever. The difference between a 679 and a 680 score can have large financial repercussions.
The fact that Amerisave assumes very broad score ranges between 661 and 749 leaves alot of tiered Risk Based Pricing (RBP) thresholds out of being considered in the rates they display. That’s a polite way of saying the rates and pricing results Amerisave is redisplaying is likely to have at least a marginal degree of inaccuracy. There are other RBP factors that Amerisave doesn’t consider in its application, the credit scoring aspect happens to be a very important and easy one to understand for most people. In this case, we’re saying we have at least a 750 FICO score by selecting Excellent Credit on the Amerisave interface and inputting 750 in the RateSpeed credit fields.
Lets look at the results:
Amerisave 30 Year Fixed Results
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RateSpeed Transparent Broker/Banker 30 Year Fixed
Lets look at the rate 6.375% and the subsequent pricing. With Amerisave 6.375% would cost you $2498.00 in Broker/Banker fees to acquire, not including 3rd party closing costs. The RateSpeed licensed Broker/Banker is offering 6.375% and will credit you $4540.00 (after paying their $2000 fee which may be applied toward 3rd party closing costs), a difference of $7038.00.
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Amerisave 5Yr ARM Results
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RateSpeed Transparent Broker/Banker 5 Year ARM
Under the 5 Yr ARM program, lets look at the rate 5.75% and the subsequent pricing. With Amerisave 5.75% would cost you $3564.00 in Broker/Banker fees to acquire, not including 3rd party closing costs. The RateSpeed licensed Broker/Banker is offering 5.75% and will credit you $1748.00 (after paying their $2000 fee which may be applied toward 3rd party closing costs), a difference of $5312.00.
There’s no need in stating the obvious about the difference between what this one Retail Lender is offering vs what a Wholesale Direct RateSpeed licensed broker is willing to provide. Even if the mortgage professional running RateSpeed had a flat (Broker/Banker) fee as high as $5000, the savings would still be over $5000 and $3000 respectively, no small coin.
Many professionals feel consumers shouldn’t shop for a mortgage based on rates and fees. That used to be a valid statement/philosophy mainly because access to clearly untaintable real time mortgage program, rate and pricing information was not available to them…that was, until now.
So, who says that big retail or direct lenders have an advantage over brokers or smaller bankers? Turn what has been kept inside on to the outside and wield transparency as an advantage instead of a hindrance.
