Mortgage Banker

Financial intermediaries that originate mortgage loans through loan officers or independent mortgage brokers and sell the mortgages into the secondary mortgage market.

Mortgage Refinancing and Banks - What You Need to Know

If you’re considering refinancing your mortgage with a bank, you need to read this article. A little known loophole in the Real Estate Settlement Procedures Act could cost you thousands of dollars in unnecessary mortgage interest. Here are several things to consider before refinancing your mortgage with a bank.

The Real Estate Settlement Procedures Act (RESPA) protects homeowners from abusive lending practices by requiring mortgage lenders to disclose all of the fees associated with their loans. Sounds good right? There’s a catch. Banks are exempt from RESPA laws due to a loophole created by the banking lobby.

The first thing you need to know about banks and mortgage loans is that your bank is in the mortgage business to make money. Your bank doesn’t do this collecting the interest from payment you send in every month; banks make the majority of their profits selling loans on the secondary market. The secondary market is where investors buy and sell mortgage debt for a profit. What makes a profitable investment on the secondary mortgage market? The answer: high interest mortgage debt. Your banker wants you to pay the highest mortgage rate possible so the bank makes the most money selling your loan on the secondary market.

How does the bank accomplish this? They do it by charging you Service Release Premium. If you’re familiar with Yield Spread Premium, you know that mortgage companies and brokers mark up your mortgage rate to receive a bonus from the wholesale lenders. Banks do the same thing to make money selling the loans on the secondary market. When the mortgage rate is marked up by a bank the markup is called Service Release Premium. Now you might be asking yourself how RESPA factors into this. Because your bank is exempt from RESPA laws, the bank will never tell you how much your mortgage interest rate has been marked up.

The bank knows the wholesale mortgage rate you would have qualified for in a competitive market; however, banks build Service Release Premium into their rate sheets. Your loan representative will show you the bank’s rate sheets and swear the interest rate isn’t marked up; however, if you check Fannie Mae’s weekly yield you’ll see the bank’s markup clear as day. Fannie Mae publishes the weekly yield on their website with their press releases.


You can learn more about refinancing your mortgage while avoiding costly mistakes with a free mortgage tutorial.

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Louie La tour specializes in showing homeowners how to avoid costly mortgage mistakes and predatory lenders. To get your hands on this free video tutorial: "Mortgage Refinancing - What You Need to Know," which teaches strategies for finding the best mortgage and saving thousands of dollars in the process, visit

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