Santa Monica Property Blog

CAN THE BEST MORTGAGES BE FOUND ON LOAN.COM?

January 21, 2008 on 11:47 am | In Fascinating Information, Market Trends, Of Local Importance, Uncategorized, fUNNY...mONEY | 7 Comments

We found this article while we were poking around this morning and thought it was worth passing along.

 

Can best mortgages be found on Loan.com?

Referral site claims it posts only ethical lenders, punishes lowballers

Monday, January 21, 2008

By Jack Guttentag

Inman News 

 

Five years ago, I wrote an article on Internet mortgage referral sites, six of which I examined with some care. In 2007, Loan.com joined the group, claiming a unique distinction: All the loan providers on its site have to abide by a borrower bill of rights. The question is whether this provides any substantive benefit to borrowers, or is it just another species of hype?

 

I think the site sponsors get an “A” for effort, the same type of “A” I received as an 8-year-old when I tried to vault a bar and landed on my head. The problem is that they applied the idea of certifying loan providers, which I have good reason to believe they picked up from me, to a referral site model on which it doesn’t work. It is the same model used by the firms I examined in 2002, and which are still operating: Bankrate.com, Bestrate.com, Compareinterestrates.com, Domania.com, Interest.com and Loanpage.com.

 

Referral sites charge loan providers who post their mortgage prices on the sites. They are a better information source than newspapers because their coverage is generally wider and the prices are usually current. (Prices reported in newspapers are obsolete when published.) Referral sites connect to the Web sites of the loan providers listed, and may also show their telephone numbers, which is convenient.

 

However, selecting loan providers who show the lowest prices on a referral site is hazardous, for three reasons. I will illustrate these reasons with Loan.com, though they apply to the other referral sites as well.

 

First, the prices shown apply only to borrowers who meet the highest underwriting standards — “creampuff loans.” In the case of Loan.com, the posted prices don’t apply if your credit is less than good; if you are putting less than 20 percent down; if you cannot fully document your income and assets; if you are refinancing to take out cash; if the property is anything but a single-family house; or if the property is not your permanent residence. These exclusions constitute a majority of borrowers.

 

It is foolish to expect that the lender with the best price on a creampuff will also have the best price on, e.g., a low-documentation or small-down-payment loan. The correlation is close to zero.

 

Second, you can’t shop adjustable-rate mortgages (ARMs) effectively, even if your loan is a creampuff, because information is not provided on ARM features that affect the interest rate after the initial rate period is over. These include the rate index, margin, rate adjustment caps, and maximum rate.

 

Third, and most important, borrowers can’t fully rely on the prices shown on the screen because referral sites provide an enormous temptation to lowball, or price below the price the loan provider actually expects to deliver. A low price is the only way a loan provider has of grabbing the borrower’s attention.

 

Loan providers can’t be held to the prices they quote, since they are committed only when they lock, at which point the market may have changed. The market is volatile, with prices reset daily and sometimes within the day.

 

Further, the final price is contingent on the borrower being approved, a process that provides ample opportunity for price adjustments, many of them legitimate — as when the borrower does not meet all the underwriting requirements assumed in the displayed prices. Easily concealed in a legitimate price adjustment is an illegitimate increment that retrieves the lowball quote from the borrower’s grasp.

 

The largest of the referral sites, Bankrate.com, has been sued by a loan provider claiming that other loan providers were lowballing. In its defense, Bankrate.com claimed that it polices the behavior of its loan providers through a process of mystery shopping, and if it finds that a loan provider is not honoring the prices posted on Bankrate’s site, it will temporarily suspend them from advertising on the site. Bankrate’s CEO was quoted in the Wall Street Journal as saying, “It’s a pretty onerous policy and we bounce dozens of people a month.”

 

Dozens of bounces a month indicate a pattern of widespread violations. It also indicates that the punishment of being unable to list for a few days is not much of a deterrent. It is not in the financial interest of the site to bounce them permanently.

 

The borrower bill of rights on Loan.com includes a “Rate Quote That Won’t Change,” i.e., no lowballing. But lowballing happens, despite the pledge, and Loan.com has had to adopt the same tactic as Bankrate.com to deal with it. Loan.com has mystery shoppers to check for compliance, and they suspend violators — but not for very long.

 

Given the existing referral site structure, lowballing is an insoluble problem. I predict that in 2008 a new type of referral site will arise that does not have the problem.

 

The writer is professor of finance emeritus at the Wharton School of the University of Pennsylvania. Comments and questions can be left at www.mtgprofessor.com.

 

 

http://www.inman.com/hstory.aspx?ID=65838

 

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John Edwards + the Mortgage Lending Mess

January 18, 2008 on 12:13 am | In Fascinating Information, Lights Camera Transaction, Market Trends, Of Local Importance, Problem Solving, Uncategorized | 9 Comments

As coincidence would have it, we were downtown at building and safety pulling records this morning, and presidential candidate John Edwards was making a stop  at the Service Employees International Union office in downtown Los Angeles, so we thought we’d go and check him out.
 

We go this close to him. 

 Real estate wise, he commented on fixing the mortgage lending mess.
 

“We need a president of the United States that will stand up for workers, homeowners — not the massive lending industry.”

Please allow us to disclose that this is an equal opportunity website. Coincidence do not have us in Van Nuys where presidential candidate Barack Obama was speaking at a private home, or in Compton church where Hillary Clinton laid out a plan to help struggling communities.

 

Meantime, we had fun taking photos today….

 

 

SAVE THE TREES

January 16, 2008 on 6:59 pm | In Fascinating Information, Green, Landmarks, Of Local Importance, Problem, Santa Monica Landmarks, The City of Santa Monica says, Uncategorized | 19 Comments

SAVE THE TREES
TO TREE OR NOT TO TREE
 

The efforts of a group of environmental activists to historically preserve 153 ficus trees in downtown Santa Monica was dealt another blow this week, and there are possibilities that legal steps will be taken to stop the City’s contentious tree removal plan.
 

The Landmarks Commission rejected a request by the Santa Monica Treesavers to historically and culturally designate a series of large canopied ficuses on Second and Fourth streets, an attempt by the ad hoc organization of residents and business owners to keep the trees from being uprooted.
 

The Treesavers have been mobilizing the past four months to pull the plug on the removal of 54 ficus trees from the downtown area, part of City Hall’s plans to improve and beautify Second and Fourth streets from Colorado Avenue to Wilshire Boulevard. The streetscape improvement project calls for the transplantation of 31 ficuses to elsewhere in the city and the destruction of 23 trees that have been identified as structurally deficient and unlikely to survive a move.
 

As the trees were not supported for landmarking in Monday’s morning, there are thoughts that the Treesavers are likely to revive a lawsuit which alleges City Hall violated state law by failing to submit an environmental impact report.
 

A few days before the project was set to start in October, a Los Angeles County judge issued a temporary injunction against City Hall, halting work crews from removing any of the trees. The environmental activists put the lawsuit on hiatus after they filed a petition to designate the trees as landmarks late last year.
 

 The Treesavers recently met with attorney Tom Nitti, to discuss the possibility of filing an appeal to the commission’s decision.
 

A court hearing is scheduled on Feb. 22 and City Hall has promised not to touch the trees until then, Nitti noted, the commission had postponed discussing the trees at least twice since it first appeared on its agenda in November. The Treesavers requested the postponements because they wanted more time to prepare an argument.
 

The Landmark commission was near unanimous in denying the landmarks application, with Ruthann Lehrer being the sole voice in support of designation, persuaded by a revelation of a possible tie-in between the planting of the trees in the early 1960s and the women’s and environmental movements. City staff had recommended that the commission deny the request, finding that the trees did not meet any of the six criteria necessary for a designation.
 

Apart from promoting the ecological virtues of the ficuses, the Treesavers dedicated a bulk of their argument on the story of former Santa Monica resident Jacqueline Girion, a long-time community activist who was considered to be instrumental in getting the trees planted. Girion resided in the Ocean Park neighborhood for 16 years and for a period of time served on the Santa Monica Chamber of Commerce’s City Beautification Committee. It was on this committee that Girion, a mother of five children, fostered a
relationship with downtown business owners and helped secure the planting of the
ficus trees, according to the Treesavers.
 

 “Not one of those trees represents a historic site,” son Shephard Girion said. “As a collection, they represent Santa Monica.”
 

Under the landmarks ordinance, a structure can qualify for designation if it is associated
with a historic person or significant event. While Girion might have been instrumental in planting the trees, some commissioners said they didn’t believe she was an historic figure and couldn’t find enough significance with the trees to warrant a designation.
 

“These special trees have a groundswell of public support, there’s a reason for it because they’re individually important,” said Commissioner Roger Genser. “As a group, I don’t think they come to a level of being landmarked trees.”
 

Lehrer disagreed and said while Girion might not fit the traditional description of a
historic person, her contributions to the civic life of Santa Monica was significant.
“I was quite taken and amazed by her contributions,” Lehrer said.
 

Information taken from a story by Melody Hanyati that ran in the January 16^th, 2008 Santa Monica Daily Press.
http://www.smdp.com/site/archives/011608.pdf
 

WHAT’S THE POINT OF A HISTORIC DISTRICT IF THE RESIDENTS CAN ERECT MODERNIST STRUCTURES?

January 10, 2008 on 10:00 am | In Fascinating Information, Historic Properties, Landmarks, Legal, Of Local Importance, The City of Santa Monica says, Uncategorized | 11 Comments

WHAT’S THE POINT OF A HISTORIC DISTRICT IF THE RESIDENTS CAN ERECT MODERNIST STRUCTURES?
Neighbors rally against construction plan in Third Street District
 

 

Residentsand preservationists have filed an appeal to a new residential construction project in the heart of the Third Street Historic District. The appeal to the proposal at 2642 Second St. was filed on Dec. 20 in response to a Landmarks Commission decision about 10 days prior that gave propertyowners Mark Gorman and Beth Burns the green light to erect a two-story home that neighbors have called “modernist.” The appeal moves on to the City Council which could hold a hearing on the issue sometime this month.
 Appeals to projects can be filed within 10 days of a Landmarks Commission decision, keeping building permits from being issued until the matter is resolved, according to Roxanne Tanemori, the planning associate liaison to the Landmarks Commission.
 The appellants — Tony Haig, who owns a Victorian on Beach Street, Scott Campbell, who owns the so-called craftsman “airport” bungalow off Ocean Park Boulevard, and Bea Nemlaha, who owns a bungalow on Third Street — all close neighbors to the proposed modernist structure - contend that the design of the proposed house does not keep with the spirit of the historic district and violates its guidelines.
 “The historic guidelines are not being applied,” Nemlaha said. “As a result, projects are now being approved which are neither harmonious nor compatible with the character of the district.”
 

The City Council established the historic district in 1990, one of two such designated areas in Santa Monica, the other being the Bay Craftsman Cluster Historic District in Ocean Park. The Third Street Historic District includes more than 40 historic homes that contribute to the district, including two churches and a former church that was converted into a private residence. The existing duplex on the Gorman-Burns property is considered to be a noncontributing feature to the district, giving the homeowners a bit more flexibility than if they were renovating a contributing structure.
 

The couple seemed surprised by the appeal. “We’ve shown respect and care to the neighbors throughout this process,” they stated. “We made myriad changes to the design and its height, roofline, shape, materials, square footage over the last seven months, at significant cost.”
 

Opponents say they fear that the integrity of the district is being  compromised and the guidelines are being disrespected by both the homeowners and the Landmarks Commission in granting the project to move forward. The couple’s project coincides with a more controversial project at 2617 Third St., where the owner of a bungalow is proposing to
move his front house forward in order to expand on the back house.
 

“The people in the district feel it is important the guidelines for the district be upheld,” said Karen Blechman, who lives on Third Street. “As with the other project on Third Street, this project on Second Street in many significant ways didn’t conform to the guidelines and
therefore when the Landmarks Commission approved it, it was setting a very unfortunate precedent.”
 

Most of the commissioners at the Dec. 10 meeting seemed supportive of the project, expressing their appreciation for the changes the homeowners made in the design, changes suggested at previous commission hearings. The project was approved with the contingency that the color of the house change from a bright white to a softer hue.
 

Neighbors that oppose the project believe that the design is far too contemporary and refute the homeowners’ assessment that the architecture of the proposed house borrows defining elements from nearby historic homes in the district.
 

“A contemporary building cannot and will not maintain or enhance the turn of the century character of this old beach neighborhood,” according to a statement in the appeal.
 

The neighbors had already planned for an appeal even before the Landmarks Commission decision was made last month and Nemlaha suggested another could be filed if the Third Street project is also approved by the commission on Jan. 14.
 

Though he has yet to take an official stance on the issue, Mayor Herb Katz said on Wednesday that he believes that if the project is on a non-contributing site and is not a monstrosity, he would be inclined to throw his support behind it. To Katz, who is an architect, change is part of how a historic district grows.
 

“My feeling is a lot of times these districts don’t want you to do anything ‘new’ that is contemporary … but that is how you grow and that is how you change,” Katz said. “(The project) needs to be in context in terms of size and in context with the neighborhood, but I am not one to say just because it’s contemporary, it doesn’t fit.”
 

info couresty of BY MELODY HANATANI Santa Monica Daily Press Staff Writer
http://www.smdp.com/site/archives/010308.pdf
 

 

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