Review of The Loan Wolf
by Arnold Kling
July 14, 1996
Several of the opinions that I have expressed about mortgages over the past two years on
The Homebuyer's Fair are reinforced in
a book called The Loan Wolf Mortgage Guide by Randy Johnson, the President
of Independence Mortgage Company in Newport Beach, California. In particular, the author
and I agree that:
- The Annual Percentage Rate (APR) is not a useful tool for comparing
mortgages
- The 30-year mortgage is not the best choice for many borrowers, as you
will find by trying the Intelligent
Mortgage Agent (TM)
- Not being an informed mortgage shopper can cost you a lot of
money, because a lender will try to charge you an above-market rate if you will
go for it. Probably the majority of borrowers either pick the wrong loan, pay too
much for the loan they get, or both.
The author points out a number of approaches that lenders use to induce
borrowers to pay higher rates for their loans. He recommends that
borrowers employ an assertive negotiating strategy, and he suggests several
specific tactics.
The tone of the book is very negative toward the mortgage lending business,
as indicated by chapter titles like "How Lenders Make More Money Without The
Customer Knowing About It." While the author is correct in pointing out that
you need to be more wary about getting a fair deal on a mortgage than, say buying
cereal or a toaster,
it is worth remembering that mortgage lending is
free of the price regulations and anti-competitive practices that exist in
some other businesses. Market forces do operate, so that you can get a competitive
interest rate. We would agree, however, that in order to get a
good mortgage you have to work at it.
The author and I agree that "information is power," and in the case
of mortgage borrowing it can keep you from getting fleeced.
More information about The Loan Wolf may be obtained at
http://www.loan-wolf.com.
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