The answer is that JVM gets paid if and only if a buyer’s loan closes.
On a loan with no discount points, our entire commission is earned when our mortgage bank sells the loan to an investor for a premium on the secondary market. This sale usually takes place within about a one to three week window after we fund the loan internally with our “warehouse line of credit.”
We typically quote interest rate options with no discount points. The no discount points or “no points” option will usually be associated with a slightly higher rate, but this also means borrowers are not paying us points directly. If a borrower elects to pay points, our commission is a mixture of the points and the premium from the investor.
As an aside, we typically do not recommend that borrowers pay points to buy down their interest rate because the return on investment is too small. If buyers do opt to pay points, a 1% discount fee will usually buy down an interest rate by approximately a 1/4%, depending on loan type and market conditions.
One final point: Most mortgage banks must split the “premium” earned on the secondary market between the loan officer and the funding branch. B/c JVM has no loan officers, we do not have to split the premium, giving us a cost and rate advantage over other mortgage banks.
Jay Voorhees
Founder/Broker | JVM Lending
(855) 855-4491 | DRE# 01524255, NMLS# 310167
