Originally Posted by wofcol28
That is a good point. Actually, Lenders in all states pay us a broker fee for closed loans or we would most likely go bankrupt. I would also like to point out a couple of items in this disclosure:
-The disclosures, terms of use, etc. are the same at LendingTree.com as they are through any partner, which illustrates my point that Lenders do not pay any additonal fees to LendingTree when working with a customer through an airline program.
-The actual amount of the 'broker fee of up to $925' is determined by the amount of the loan and is rarely that high.
-"This is the total compensation LendingTree will receive from the Lender for its services and is paid by the lender." This states that the Lender cannot pass the cost on to the consumer. Therefore, this cost is incurred by the lender.
As a person with an interest in a competitor to LendingTree I would expect nothing less than negative opinion of our program and I respect your loyalty to your own ‘Miles-for-Mortgage’ Program…whichever that may be.
Thank you for the response bocastephen. Let me know if you have any other questions.
Eric
sorry, this will get abit long-winded...
well, I don't have a 'negative opinion' of lendingtree...I am just offering information to ensure consumers make an informed choice and remember that you don't get something for nothing. The lenders may not pay an additional fee to lendingtree for a mileage-earning mortgage, but the lender or broker can pad the yield spread to offer a standard appearing loan rate while ensuring enough profit to cover the travel incentive. The customer might have qualified for a lower rate with less spread. The cost of the fee might be covered by the lender, but it is certainly being passed on to the consumer indirectly through the rate - which is the essence of yield spread premium pricing. If the lendingtree fee is less than $925, it would seem even more difficult for me to comprehend how the travel awards are being paid for unless there is premium pricing somewhere - you can't pay the airline for the miles with thin air.
Gary, now to your reader. Without knowing the broker or lender, or how they price their closing costs, I can say that a couple things might be going on here. Most closing costs on a mortgage are fixed, although some items, like pre-paids, will vary with the amount. Given this is a home-equity loan and the property is not changing hands, I will take a guess that the closing costs should be similar regardless of the loan amount. The reader should have a good faith estimate for both loan amounts they are considering to compare. Now, the larger loan amount could make a difference to the broker. If he is charging yield spread (most likely, if no broker fee is on the GFE), then his earnings will definately vary with the loan amount. Most brokers won't disclose their back-end fee (yield spread), but it's always worth a try to ask and make sure it's not something outrageous. The broker will definately earn more from a higher loan amount, but provided there is no pre-payment penalty and the closing costs are the same, it should be OK for the reader to do this. Just make sure the excess is paid quickly so the extra interest expense doesn't wipe out of the value of the extra miles.