World Savings ripoff Predatory Lending Interest Rate Scam Oakland California

I hated working at World Savings in the loan centers, but they are offering you the best service as a home owner. Now working for a mortgage broker, I understand how the company has stayed so profitable. Its not because of misleading borrower. World Savings is actually looking out for your best interest. The other employee here is not lying, I agree with him completely. Let me explain your benefit beside payment.

Most people are actually taking a 1% neg am( similar to the loan you are paying 1.95% on) The other lenders are raising your deffered interest much faster not because of the actual interest rate. They add onto your deffered interest right when your loan is priced. Quick Qualifier, Stated Income, Cash Out, Credit Score, Condo, PUD, Lite Doc, & No Cost are just a few of the reasons at the time of application your actual interest rate is already way above Worlds 4.85%. For example a friend I just closed through World would have had around 5.75% rate
Other Lender
2.0 index
2.5 base margin
.5 stated income
.5 cash out refi
.25 credit score-680-719)
End Rate 5.75%

At World he was charged
2.0 index
2.85 margin
END RATE 4.85%

Everyone gets the same margin no adds for the items mentioned above. The only way it would have benefited him to go with another lender is if we used full doc, verifed income, had no cash out, his fico was above 719 and we could verify 2 months reserves.

MAINLY IN SO CAL MARKET, you have an appraiser hired by someone to give an independent value of your property. This guy is under pressure to say your home is valued at what they need to get your deal done. Not the value at the time of appraisal. World is lending you the money in the World Savings banks. They send a appraiser they pick, even if someone has already appraised your property. They will not be pushed to hit a value needed to close the deal. People always complain the appraisal was cut by the World Appraiser. He actually has determined your original appraisal was not a Independent Estimate of the value of your home. If your home wasnt worth $500,000 he only saved you from owing more then the property value. I have 1 client who refinaced 2 years ago, she pulled out 100% of the appraised value in 2003. The appraisal in 2003 said her home value was $550,000, she owes 449,000 and a prepayment penalty to refinace right now of $9000. I took the application and got a copy of the appraisal in 2003. While setting up her loan, I found some recent closings in 2005 for exact model with better location and they just sold for $565,000. After the adjustment for -$10,00o0 because she backs traffic, it means today her property is worth $555,000. In Orange County she should have a increase of around $100,000 in value. I looked closely at the prior appraisal and found her home had been compared to a tract of homes far superior to her tract and some adjustments to increase her value were less the justifiable. I called 2 appraisers for a verbal check of the value they may appraise it at, our conservative appraiser agreed with me at $565,000. The other appraiser said"I'd be pushing it , bit I can bring it at $660,000". We are talking about a 70+ single woman who is already mortgaged to the max. Why would someone want to be mortgaged beyond the value of the property? World will not let this happen, and they waive prepayment penalties under 3 circumstances. No other lender I know of waives a prepayment for any reason. Just my thoughts on your deal. You should feel great that World employees are practically starving compared to employees doing the same job at other places right now. Its Worlds way of keeping overhead low, and competing with the major players who just left fixed rate lending. I hated working at World, but I love selling the product. It is the same loan my grandmother is in, it allows her to remain in her home with limited income. Other lenders would have a rate so outrageous she would find it hard to refinace at her age.( Lenders can deny loans based on age-
EQUAL OPPORTUNITY-FAIR LENDING ACT SAYS
CANNOT DISCRIMINATE BASED ON AGE(PROVIDED THE APPLICANT HAS THE CAPACITY TO ENTER INTO A BINDING CONTRACT) I have had elderly people be declined because they're age, it is to risky for the bank to allow them to accumulate negative interest so quickly.

The loan you refer to is the Pick-A-Pay loan. The 1.95% rate is the "minimum payment" rate, not the interest rate. There are actually 4 monthly payment rates on your statement each month:

Minimum Payment - based on the introductory 1.95% (allows borrower to free up cashflow to pay down other, high interest debt such as credit cards and student loans, or invest in 401K, IRA, etc.) This payment will not always cover the Interest due for the month and will accrue deferred interest, raising the principle balance of the loan.

Interest Only Payment - This payment will cover only the interest due for the month at the loan's "Fully Indexed Rate". In your case, the rate on the loan is 4.85%. The "Fully Indexed Rate" is the sum of the Index your loan is based on (most likely CODI or COSI index) plus the "margin" or profit margin the bank charges for loaning you the money.

Fully Amortized Payment - This is the full 30 year Principle and Interest payment. This is the payment necessary to fully pay off your mortgage within the 30 year term at the current interest rate.

15 Year Payment - This is the payment amount necessary to pay off the mortgage in 15 years.

Yours is a very common misconception regarding this loan. This is easily the most difficult loan in America to explain and understand. Many of the largest lenders offer a version of this loan and the versions are basically the same, as is the purpose.

The purpose of the 1.95% payment rate is to increase the cashflow of the borrower by offering the option of paying a much lower monthly payment when necessary. The actual interest rate on the loan is never 1.95%, it is always the index plus margin. The index changes once per month, but the margin never changes over the life of the loan (the index is not controlled by the bank, the margin is but is set at the loan's inception and never changed).

Yes, there will be deferred interest added to the loan principle balance when the minimum payment is made. Think of it this way... A typical loan amount in the San Francisco Bay Area is $400,000 with a 30 year term. With an interest rate of 4.85, the 30 year payment would be $2110.77. The 1.95% payment rate would be $1468.50. The Interest Only payment would be $1616.67. If you chose to make the minimum payment, you would free up $642.27 for that month to spend elsewhere. Since the interest due for that month was $1616.67, your principle balance would increase by $148.17. The $642.27 that you saved by choosing the minimum payment could be used to pay down high interest rate credit cards, student loans, it could be invested in a 401K, IRA, Money Market account, used for a vacation, whatever. Over a year, that comes to about $7700 that can be used for whatever you want. During that year, your mortgage principle balance will increase only around $1800 if you make the minimum payment every month. Now, taking into account the appreciation rate of homes in the Bay Area (around 15% per year or more), the value of your home at the end of that year would be about $460,000, a $60,000 gain. Now the deferred interest doesn't seem so significant, does it?

+$7700 Increased Cashflow
+$60,000 Appreciation
-$1800 Deferred Interest
=
+$65,900 Positive Gain in ONE YEAR

And remember... Mortgage interest is TAX DEDUCTIBLE. I know I sound like a salesman (I am), but I really believe in this loan. Especially in the Bay Area market, where values continue to rise in the 15-30% per year range. Even if the market falls apart and there is ZERO appreciation (unlikely in the near future), the net gain of cashflow against deferred interest would be $5900. Better to pay 4.85% on that $1800 on your home loan than to pay $7700 at 15-21% to a credit card company.

If you were to refinance this loan in 3 years, including deferred interest of $10,000 (unlikely amount, but for argument's sake), you would be financing $410,000. Your home, had it been worth $400,000, even with only 10% appreciation per year, would now be worth around $530,000. You would be able to refi the original loan amount and even take tens of thousands of dollars worth of equity out in CASH. You would have also been able to spend over $20,000 in those 3 years on whatever you wanted due to the smaller minimum payment.

As for the minimum payment in years 2 and 3... There is a payment cap of 7.5% per year. That's not 7.5% as an interest rate, but 7.5% of the last year's payment. For instance: If your minimum payment in year 1 was $1000, then your payment in year 2 could NOT be more than $1075. Year 3 cannot be more than $1155.63. Year 4 $1242.30. This payment amount will increase until it equals the Fully Indexed rate (the 30 year Principle and Interest payment). This usually occurs in year 5 or 6. I don't know who told you about the 2.95 and 3.95 in years 2 and 3, but that is incorrect, as World has never offered such a program.

I'm not writing this to sell anything to anyone. What I hope I have done is help you to realize that you weren't ripped off and you did get a very good loan. I know that ARM loans are difficult to understand, but they are better than fixed rate loans in many ways.

World Savings is by far the most Ethical, Honest, and Upstanding company I have ever known, and I am proud to work for them. Due to the complex nature of adjustable mortgages, there will always be Real Estate agents, Mortgage Loan Brokers, Loan Agents, and even World employees who do not understand the products well enough to explain them clearly to the public. That is too bad, because feelings of being "scammed" and "ripped off" are common when the borrower doesn't truly understand the loan they are in.