The Newspaper Game!

Have you ever looked in your local paper or looked in the Sunday Newspaper to get interest rates for mortgages? After looking did you take the time to call some of the lenders? What did you find? I will be that 99% of the time if you called you found out that the interest rate was not available. Or that the rate was available if you were willing to pay the points listed in the paper. If I am the consumer I am thinking what kind of game is this?

When you look at the rates posted in the paper I break them down into 3 classes; Liars, honest but trying to look good, and I don’t care I am spending the company’s money. I will work backwards on this list. When I managed a branch for a large corporation, part of their business plan was to be in the newspaper. Their rates were not competitive and when I would have discussions with my boss he would say “don’t worry about putting a rate in there, just make sure our name and phone number are in bold print.” Their philosophy was that their name alone would get the business and that they viewed the paper as another place to advertise their name. Never mind that people were checking rates, just get the name out there in one more place. These are categorized by higher than average interest rates or the famous “Call for rates.” An interesting marketing strategy, but it would cause the question from the consumer, what is your rate? This was all the company was trying to do, get the phone to ring.

Then you have the honest but trying to look good. I will place the company I work for now in this category. They use the put a low rate in with points trick. This is where they put a rate in with 1 origination and 1 discount point so that the rate seems as low as the others. If you were to equate that rate out to a 0 point loan then it would be rate we could and would honor, but the rate in the paper will be expensive. At least we let you know how expensive it will be.

Lastly, we have the liars; these are the guys that use the famous bait and switch tactic. They put a rate in that is well below market, usually .25% or more and then when you call them they say that the rate was there last week but the market has moved or worse they tell you they can do that rate and then when you get your application you have charges that equate to 1 or 2 points. Again, it is the concept to do anything to make the phone ring and then get the borrower to commit. Once you have them committed you can usually coerce them or fast talk them to the closing table.

So what does the rate table in the paper do? Well I would personally use it as a guide to where interest rates are. Look for the middle of the rate scale and that is a good chance that you will be able to get that rate without excessive fees or expense.

For comments on this please contact Chris Scheer at cscheer@cornerstonestl.com or 314.223.9824.