Advertising is my avocation and therefore I am very attentive to almost all advertising. Too many words are heard on the air that in my opinion haven't any meaning and simply desensitize our minds. The words “we are number one”, “a name you can trust”, “simply the best”, “preferred by more (you fill in the blanks)” and “brewed to perfection” are just phrases that add nothing to the qualifications of the product or service, and are meant to convey an image that cannot be proven. What is "the best", "trust" or “perfection”? These are meaningless examples of a company's attempt to persuade you, and they are considered harmless. That isn't necessarily true in the mortgage business, and thus this article.
An example of what I am talking about that can be harmful is the following: "It's a no brainer, we can either save you money or we can't". Simple words that generally don't mean a thing because of the manipulation of the meaning of the word “save”. Save, to me, means that the transaction will result in my spending less dollars for the loan than I would have spent if I didn't take it at all. Lowering your payment on a 30-year fixed loan that you have paid on for 2.5 years might easily cost you more if you take another 30-year loan and start over, even if the payment is slightly lower.
I hear the head of a men's clothing company state that he "guarantees we will love the clothes" we buy from his company.
What does that mean? How do we measure it and what is the significance of his guarantee? Again, this is trivial, but it sets a pattern that gets us lulled into accepting hollow words, and worse, expecting something that won't be there.
When lenders advertise rates, they get away with all kinds of what most people would call "smoke and mirrors". Instead of advertising a rate that is under the market and stating it will cost one point (one percent of the loan, which is used to buy down the rate), they will smile and tell you the APR instead. They will not advertise a rate of 5.75% with a cost of one point, they will say 5.75% with an APR of 5.99%. Did you know that meant you were going to have to pay a point? Probably not. Not only is it not illegal, it is mandatory to state an APR when using an interest rate in an advertisement. But why not state the obvious: it will cost you a point. It is just part of the culture to use words that are meaningless.
Roger Schlesinger's Mortgage Minute is heard on hundreds of radio stations and daily on the Hugh Hewitt radio show and Michael Medved shows. Roger interacts with his hosts and explores the complicated financial markets in order to enlighten his listeners and direct them along their own unique road to financial freedom.