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Unfortunately, there are many ways to fleese a trusting buyer.

Who can you trust? Probably not the sleazy guy pictured but there are others who appear trustworthy who could be picking your pockets.

Most of us, when shopping, search for someone we can trust for good advice and a fair deal. Consequently, there are those who fulfill that need with a trustworthy appearance.  

Often advertisements show them holding a cute child or pet. 

Some appear trustworthy by company association, like starting a credit union or even better a military credit union.

On Friday, 11/27, I noticed a military federal credit union (FCU) advertising a Zero Point loan for 4.875% with an APR of 4.963% and the FCU would even pay lender fees. 

Hmmmm... on Friday, at that rate, they should be paying their borrower's fees and a signing bonus.

The Zero Point APR seemed high to me so I used my APR calculator to find the fees.

The calculation required a loan amount and there was no loan amount disclosed beside the advertised rate and APR so I scrolled down to their detailed disclosure to see what I could see.  

Below, in lots of small print, the FCU disclosed a $300,000 loan with a rate of 5.000%, 1-Point and an APR of 5.089.   Hmmm... In this example, the APR contained 1 Point but no lender fees or prepaid interest. 

So, based on their small print disclosure I also used a $300,000 loan amount and zero allowance for prepaid interest to find the fees on their Zero point 4.875% Rate.

Wow, based on the advertised Rate and APR, lender fees are a whopping $3,000.  BUT WAIT.... There's more!  Leave us not forget the small matter of 1.75% undisclosed yield spread premium (YSP) that, translated to dollars, is an additional $5,250.  How do I know there is 1.75 Point YSP, you ask.  Since you asked, on Friday, I know of at least two wholesale lenders offering their approved brokers 1.75 YSP on a 4.875% Rate.  If a small, local mortgage broker can find that much YSP then a national FCU should be able to do that or better.

Did I mention that credit unions are not required to disclose yield spread premium?

To recap, let me count the ways this Military Federal Credit Union pissed me off.

1. Credit Unions are supposed to be Non-Profit clubs which implies their rates and fees will at least be competitive with other lenders. 
2. A "military" CU implies it is a private club where our military will receive better deals than elsewhere. In reality, this Federal CU is even more expensive than any of the expensive four big banks.
3. $8,250 is a lot of profit on a $300,000 loan; especially from a company that lulls it's customers into a false sense of security that may prevent their "club members" from aggressively shopping elsewhere.
4. This CS CU is targeting our young military personnel which is typically an unsophisticated market and that dear readers is a load of BS.
5. The APR in their small print disclosure failed to include prepaid interest.  Never trust a lender that does not include at least 15 days prepaid interest in their APR when the closing date is unknown. The dollar amount for 15 days interest on a $300,000 loan at 5.000% is $625 and that is a large Whoops at closing.
6. This Federal CU may disclose prepaid interest in their good faith estimates but I don't know that because a GFE could not be obtained until the borrower completed a loan application... more BS.

The moral of this story?  Let education, facts and figures be your guide... NEVER buy anything based solely on trust.  You may choose a lender because you trust them for one reason or another but do not fail to always verify your trust.

Education is the Consumer's Only Real Protection.

Bill Ladewig

800.664.7283 (SAVE)

Bill@YourFhaGuru.com

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Bill Ladewig is a Mortgage Broker Licensed by the California Department of Real Estate 00968137

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Are you aware that under current law those serving in the military who buy their first home are not likely to be able to use the first time home buyers credit? 

I work with military families relocating to Camp LeJeune, New River Air Station and The Naval Hospital at Camp LeJeune in Jacksonville, N C and this has been such a disappointment to these families. 

Most military are only at a duty station for a short period of time and must sell the house they have purchased before the 36 month requirement in the current law is fulfilled--which means they are not eligible for the tax credit.

Finally, someone is looking out for our service men and women.

Our own North Carolina Representative, Walter B. Jones introduced language earlier in the year that has been written into the new law that would allow military personnel to retain the first time home buyer's credit if they need to sell their home within the first 36 months due to deployment or transfers.

Thanks Rep. Walter Jones for looking out for our military families!

Cynthia Tilghman, Realtor, Onslow County Home Specialist 910 459 9189 Email Me

Kingsbridge Realty, Inc., Making Houses Homes

We take pride in assisting Military Families locate a home in Onslow County when relocating to Camp Lejeune North Carolina

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The US House of Representatives overwhelming voted to extend the first time home buyers credit for an additional 12 months to anyone in the military who has served overseas for three months in 2009.  In a vote of 416 to zero the bill now has to go the US Senate and the President for final approval.

This extension could give up to 350,000 military families currently deployed overseas unitl November 2010 to take advantage of the current tax credit.  In addition the IRS "recapture" rules will be waived for any service member who is deployed and must sell or rent their home. 

Known as the Service Members Home Owners Tax Act this bill also contains the provision to waive the income tax liability currently in the expanded Department of Defense Homeowners Assistance Program.  

The next step for this bill (HR 3590) is for the Senate Finance Committee to review the bill and hopefully move it to a vote in the full Senate.

This seems to be one time that the US Congress, Senate and President should be able to agree.  Extending the tax credit for our military is the right thing to do no matter what your political beliefs.

Yesterday the House of Representatives unanimously voted to extend the $8,000 first-time home buyer tax credit to active military personnel, foreign service and intelligence officers.  HR 3590 extends the existing tax credit to this group until November 30th, 2010.  The bill now goes to the Senate, and is expected to pass with the same ease.

The bill was introduced by Rep. Charles Rangel (D-NY) because it was thought that military personel serving oversees this year did not have the same opportunity to take advantage of the tax credit.  If the original qualifications are met, the extension applies to military personnel who spent at least 90 days of the current calendar year oversees.  It also does not require borrowers to payback the tax credit if they are deployed after receiving it.  The current tax credit requires borrowers payback the tax credit if they do not occupy the home within three years of receiving the tax credit.

No word yet on whether the $8,000 tax credit will be extended for all eligible borrowers.