Frequently Asked Questions
In a nutshell, it’s an anonymous, automated, transparent, customizable, wholesale mortgage program and interest rate pricing pre-qualification Search Engine for consumers, delivered through qualified mortgage professionals.That’s a mouthful. Here’s more to chew on:
ANONYMOUS
Consumers only provide property, financial and credit risk information typically used to determine what mortgage rates and programs are available for a given scenario. This is called ‚risk-based pricing’. RateSpeed does not collect names, addresses, social security numbers, phone numbers or other personal information that may end up in the wrong hands or abused by sales marketers.
AUTOMATED
RateSpeed is custom configured to simultaneously ‚shop’ every wholesale lender a mortgage professional is individually affiliated with in real time. What used to take a mortgage professional many hours, even days to complete and return to a consumer can now be done in seconds.
TRANSPARENT
Users of RateSpeed get to see exactly what they qualify for. Mortgage professionals have no ability to manipulate the information flow between the wholesale lenders database and the consumer, insuring consumers get to see exactly what they qualify for, including every dollar of Yield Spread Premium (the cash rebate a wholesale lender offers the consumer for accepting a higher interest rate than they qualify for.)
CUSTOMIZABLE
Unlike other mortgage pre-qualification web-sites and similar applications, RateSpeed is 100% customized to an individual mortgage professionals current stable of wholesale lender relationships. The rates, pricing and programs that RateSpeed displays are the exact same as the mortgage professional would personally quote in person or over the phone.
WHOLESALE MORTGAGE DATA
Wholesale mortgage rates, pricing and programs are only available through a licensed mortgage professional. The rates and programs widely advertised on TV and the Internet are retail and often contain hidden and/or inflated costs. RateSpeed allows consumers to see their wholesale rates without middle man manipulation.
INTEREST RATE PRICING
The pricing of mortgage interest rates is a two-tier process.
First tier: Mortgage interest rates and programs are commodities driven by supply and demand via open markets (similar to traditional stocks traded on Wall Street). Certain economic conditions, factors and reports drive mortgage interest rates up and down, often multiple times per day.
Second Tier: Every question the RateSpeed application asks either positively or negatively effects the price of a base qualifying interest rate. This is called risk based pricing. For example:
- An investment property is deemed to be of higher risk than a primary residence, therefore an investment or non-owner occupied home will yield a more expensive interest rate (price higher).
- Lower credit scores will yield more expensive rates. Credit scores below 640 will yield substantially cost interest rates while scores above 700 will yield less expensive rates (price lower).
- Higher Loan to Value ratios (Loan Amount divided by Property Value) will yield more expensive interest rates.
- Higher Debt to Income ratios (aggregate monthly credit report debt divided by monthly gross income) will yield more expensive interest rates.
- Refinance loans where a borrower receives cash-out of the transaction will price higher than a purchase loan or refinance where only the interest rate and term of the mortgage are lowered.
- Fully documenting income and assets will price interest rates lower than ‚stated’ or other reduced documentation mortgages.
- The inability to document 2 years+ continuous employment and housing history will yield higher interest rates.
How do I use RateSpeed as a consumer?
Simply fill out the anonymous financial, property and credit information in the RateSpeed application and it will automatically shop 20+ wholesale lenders and return best case interest rate and pricing results. As we release individual renditions of RateSpeed to mortgage professionals the ‘live’ application currently on www.ratespeed.com will be reduced into a simple demo and consumers will be directed to their sites, based on where the subject property is located.
Is RateSpeed trying to eliminate or disintermediate the mortgage professional?
NO! Well, we hope RateSpeed drives out the bloated disingenuous element from the industry by mandating and regulating transparent disclosure practices but honest, efficient, cost effective mortgage professionals are the backbone of the RateSpeed engine. Without these mortgage professionals and their wholesale lender relationships RateSpeed couldn’t exist since the application will be exclusively featured on existing mortgage professionals websites.
Is RateSpeed a lender?
No. RateSpeed is a customized script of licensable software that searches a qualified mortgage professional’s lender database to return best-case rates and pricing.
Since RateSpeed is not directly affiliated with mortgage brokers, bankers or banks we may objectively maintain the integrity of the information passed between the wholesale lender and the consumer.
How come I can’t see who the actual lenders are?
Couple reasons. First, certain lenders like Countrywide and Wells Fargo have separate wholesale and retail divisions, one side typically doesn’t have anything to do with the other. What you are seeing on a licensed RateSpeed mortgage professionals website are actual wholesale rates only offered via mortgage professionals, thus not available via a retail division of any given lender. So, Countrywide’s Wholesale division will have different (lower) rates availbale than their retail division or consumer facing side offers. We don’t want consumers seeing Countrywide wholesale rates then calling a Countrywide retail office in search of the same information, they won’t get it.
Second, some lenders are wholesale only, where they will only deal with a mortgage professional and are otherwise unequipped to deal with consumers directly. A consumer calling one of these lenders would be immediately told to contact a mortgage broker.
Since each mortgage professional has their individual lenders configured into their individual RateSpeed application, only the mortgage professional running RateSpeed on their sites can deliver the programs, rates and prices seen via the application. Getting information from a RateSpeed professionals site (and application) then going to another mortgage provider asking them to deliver the same information potentially opens one up to bait and switch (or worse) tactics. Trust your RateSpeed licensed mortgage provider.
Where can I find RateSpeed?
For consumers, the RateSpeed engine is available through qualified, licensed mortgage professionals and their websites. A directory of affiliated RateSpeed professionals may always be found at www.ratespeed.com/community.
Qualified mortgage professionals may apply for a license here.
Does RateSpeed sell leads?
No. RateSpeed creates leads for the progressive mortgage professional who chooses to license the software on their sites by allowing consumers to shop before they choose to buy. A mortgage professional that offers RateSpeed is effectively stating that they are amongst the most progressive, cost-effective, honest, ethical, transparent, best of breed practitioners in the industry. Consumers should seek to do business with RateSpeed licensed professionals and feel very comfortable in doing so.
Eventually, any consumer that engages the RateSpeed application on RateSpeed.com will be funneled to a licensed RateSpeed professional in the subject properties location.
How does RateSpeed make money?
We charge qualified mortgage professionals a one-time set-up fee and a monthly licensing fee to run the application. Our costs cover labor and bandwidth.
Is RateSpeed perfectly accurate?
No, nobody’s perfect including RateSpeed. While we have taken great care to address the most common factors that influence mortgage interest rates and their pricing, unique situations will always exist that may cause a price adjustment for the better or worse. A RateSpeed rate quote will be as accurate as the information a consumer provides and shall come direct from the wholesale lender without any middleman manipulation.
To further insure that a RateSpeed licensed mortgage professionals disclose exactly what a consumer qualifies for, we ask that they provide the consumer a true copy of the original wholesale rate-lock pricing document immediately upon execution.
I’m a real estate professional, how can I benefit from RateSpeed?
Contact us to locate a licensed RateSpeed mortgage professional, they can authorize you to run RateSpeed on your website. All pricing information will go directly to the mortgage professional.
Should mortgage professionals be wary of adopting a fully transparent business model?
No! Mortgage professionals would be very wise to adopt transparency as a very positive differentiating factor and advantage in the marketplace. With all of the legislation going on in Washington thats promising to foster (or force) greater transparency upon the mortgage broker, the mo-pro who adopts this business model will enjoy significant early adopter advantage. Since mortgage rates are a commodity, transparently displaying wholesale mortgage rate pricing allows the mortgage professional using RateSpeed to aggressively compete with anyone in the industry.
How will consumers who do business with a RateSpeed‚ affiliate benefit?
Consumers can finally know that they are seeing the true interest rates and costs that they qualify for. No more smoke and mirrors, bait and switch or other grievous activity that’s permeated the mortgage industry for too long. Consumers who do business with a RateSpeed licensed affiliate are assured they are doing business with an honest, ethical, efficient and progressive mortgage professional who chooses to compete for their business based on service and true cost.
If Congress mandates greater YSP transparency, will there still be a need for RateSpeed‚?
Of Course! While the main value proposition RateSpeed offers is direct access to transparent wholesale mortgage rate pricing, the application also has another innate benefit:
It’s an automated rate Search Engine, instantly shopping a mortgage professionals database of lenders in seconds, a task that otherwise takes hours, even days to do manually. This saves both the consumer and mortgage professional valuable time.
Im looking at my results page, what does ‘Price’ and ‘Broker/Banker Fee’ really mean?
Allow me to expound…
Rate. This is the effective interest rate of the loan.
APR. Annual Percentage Rate. APR, in this alpha rendition, will only account for the Broker/Banker Fee because we just don’t know what 3rd party closing costs (appraisal, title, escrow, home inspection etc) are yet. The intended purpose of displaying an APR is so that a consumer may objectively compare the cost of a given mortgage in relation to the effective interest Rate while shopping multiple mortgage providers. The APR theoretically should account for all closing costs, the problem is that the formula for calculating APR is not standardized or ubiquitous, and can be confusing and manipulatable. Within this application, when an interest rate rebates more in YSP dollars than the Broker/Banker Fee it causes the calculation to return an APR below the effective interest rate (which is even more confusing) so we flatten the APR to never dip below the effective interest rate. Instead of focusing on APR, use this calculator to compare mortgage rate quotes and closing costs. Zillow offers other intuitive mortgage calculators as well.
Loan Amount. Self explanatory, the dollar amount of the mortgage.Monthly Payment. How much you would pay the mortgage provider each month. Includes principle and interest. Interest Only options coming soon.
Price. This is the % cost or cash rebate that a given interest rate yields in the wholesale market. The Loan Amount is multiplied against the Price to equal the dollar ($) amount in cost or YSP credit.
YSP Credit. Yield Spread Premium is the cash rebate offered to a borrower from a wholesale lender for accepting a higher interest rate than they otherwise qualify for. It’s intended purpose is to allow consumers the choice of financing some or all of their closing costs, unfortunately YSP is rarely explained or disclosed properly by the mortgage professional and the consumer unknowingly accepts a higher interest rate while the mortgage professional pockets the cash rebate. There are exceptions but this has been the rule on the inside of the mortgage industry for many, many years. Mortgage professionals will get downright hostile about the topic since YSP’s have arguably fueled the business of mortgage originating for many in the industry. Holding hard and fast to the definition outlined above, a mortgage professional who licenses their own custom configured RateSpeed application from us is effectively guranteed to be 100% transparent when it comes to rate quotes and YSP’s; there is simply no way around disclosing everything they have to offer since this little piece of software insures the integrity and purity of the information flow between their wholesale lenders and the consumer.
Now that you know what YSP is, lets continue by stating RateSpeed is about transparency and choice. The application displays five levels of Price for each program (30 year fixed, 5 year ARM, etc) one Price below Par (a Par rate is the lowest interest rate a borrower qualifies for, given by the wholesale lender) and four above Par. The higher Rate one chooses above Par the more YSP Credit (or cash rebate) the consumer may receive and apply toward closing costs (Broker/Banker Fee and 3rd Party fees, i.e. appraisal, title, escrow, home inspection etc). An interest rate below Par will cost a consumer to acquire, often times called ‘buying down’ an interest rate.
In the above 30 Yr Fixed, $400k Loan Amount example:
6.25% would yield $1084.00 in cash from the wholesale lender to the consumer to be applied toward closing costs.
6.625% would yield $5844.00 in cash from the wholesale lender to the consumer to be applied toward closing costs. The first $2000 would pay the Broker/Banker fee and the rest may be applied toward 3rd party closing costs (in this scenario).
Broker/Banker Fee.
This is the (negotiable) flat fee the mortgage professional is charging to close the loan programs seen on the results page and does not include 3rd party closing costs. 3rd Party Closing Costs (i.e. appraisal, title, escrow, home inspection, taxes, insurance, etc) are expenses that are not controllable by the mortgage professional nor may they profit or ‘up-charge’ a consumer to obtain them. Near future renditions of RateSpeed will allow mortgage professionals to upload the direct fees of many 3rd party service providers to further increase the accuracy and transparency of all costs associated with obtaining a mortgage.
The Broker/Banker Fee is 100% determined by the individual mortgage professional (or company). RateSpeed does not mandate nor suggest what a mortgage professional can or should charge. This is the only field in the RateSpeed application that a mortgage professional may personally edit.
Why would the Broker/Banker Fee vary? Certain types of mortgages require more time and effort to close than others. For example, a mortgage that requires heavy paperwork/documentation to prove a borrowers income justifies a higher fee than a No-Doc mortgage.
Some of the more common fees that would be included in the Broker/Banker flat fee include:
- Origination Fee/Points
- Processing Fees
- Mortgage Broker/Banker Fee
- Document Fees
- Email Fee (yes, ive seen this ‘fee’ before)
Although $2000 is what we chose to represent as the Broker/Banker fee in this example it should not be interpreted as what a licensed mortgage professional may charge who offer RateSpeed to their consumers. The fee may be more or less, again it is completely dependent on the mortgage professional, but always disclosed up-front.
Net Cost.
Net Cost = Broker/Banker Fee minus (plus) YSP Credit (cost).
Put RateSpeed to the test!!
Using the same ubiquitous credit, financial and property risk-based mortgage qualification information, compare and contrast the rates and pricing you see from a RateSpeed professional to other mortgage websites and similar applications. You will quickly see the difference between a transparent mortgage professional who offers RateSpeed and those who don’t…unabated transparent access to real time, best-case wholesale mortgage rates and pricing for a fair fee.
RateSpeed: Enabling mortgage consumers and professionals to make smarter decisions with better information.
Got a question, comment or concern that isn’t addressed here? Hit up info@ratespeed.com and we’ll get back to you as soon as we can!
