New Member with New Cash Flow Strategy!

[Taylor Scott Siemens]

Hey everybody,

Just joined yesterday and absorbing as much info here as possible.  I'm looking forward to giving as much as I take from this community.  I am currently a loan originator in California working for a small bank.  We primarily offer our clients a program called the Bi-Annual Refinance Method.

The basics are, we refinance our clients loans every 6 months into 30 year conventional mortgages.  We sell the loan for an approximate 6.2% premium.  We cover the full cost of the refinance and then split the premium of the sale with the borrower in the form of a lender rebate (tax-free).  We're able to give our clients enough of a lender rebate each refinance that if they were to save the money in a basic savings account, they would be able to pay off the loan in cash in 15 years or less.

For example, a 400K loan earns the borrower approximately $14,000 per refinance.  $28,000 per year.  $420,000 in 15 years (not including interest earned in a savings account).

Pretty cool program since borrowers can refinance as many times as they want and the IRS/RESPA has deemed rebates legal, tax free, and good for competition.

This is obviously a very basic overview but very lucrative and beneficial for the borrower.

I look forward to meeting and interacting with you all!

Taylor

[Mike Burkett]

@Taylor Scott Siemens @Kevin Sobilo @Zack Karp  So you sell these loans to "the same few companies each time" at 106.2.  Six months later the  borrower pays that loan off at 100.0.  The buyer of the $400,000 loan paid $424,800 for that loan and will receive $400,000 when the borrower pays it off, a loss of $24,800.  After 6 months the lender has only collected a total of $12,000 interest on the loan and maybe $2,000 of that would be attributable to an interest premium the borrower was paying for the privilege to have this loan.  Unless they are brain dead, they must somehow make up that loss.

"They (the Lender) make plenty of money on fees."  However, the borrower's loan never increases and the borrower pays no fees.  Somebody pays those fees.  It's not the lender because the lender is collecting fees.  It's not the borrower because he doesn't pay any fees.  @Taylor Scott Siemens is the only party left in this transaction.  I can't imagine you are paying the fees.  

What am I missing?