Overage


Also found in: Dictionary, Thesaurus, Wikipedia.
Related to Overage: encumbered, Hassel

Overage

Apples mainly to convertible securities. Difference between how much common stock one party must sell and the other wishes to buy for the same amount of convertible in a swap.
Copyright © 2012, Campbell R. Harvey. All Rights Reserved.

overage

Additional rent for retail stores,based on a percentage of gross sales.

The Complete Real Estate Encyclopedia by Denise L. Evans, JD & O. William Evans, JD. Copyright © 2007 by The McGraw-Hill Companies, Inc.

Overage

The difference between the price posted to its loan officers by a lender or mortgage broker and the price charged the borrower.

Loan officers who work for lenders or mortgage brokers receive updated prices from their head office every morning. These consist of rates and points for different loan programs. They are the “posted prices.”

The loan officer who executes a deal at the posted price gets paid a commission that may be .5%-.7% of the loan amount. On a $100,000 loan, the commission might be $500-$700. But if the loan officer can induce the borrower to pay more than the posted price, the commission rises. It now includes an overage.

For example, the posted price on a particular loan is 5% and zero points but the loan officer induces the borrower to pay 5% and one point. That point is the overage. It is worth $1,000 on a $100,000 loan, and typically the loan officer gets half. An overage can thus double the loan officer's commission.

Overages are heavily concentrated on high-rate loans with negative points, or “rebates.” For example, the lender posting a price of 5% and zero points might also quote 5.25% and -2 points. Loan officers push higher-rate plus rebate combinations because they can collect an overage without taking any cash out of borrowers' pockets. If the loan officer in the example above quotes 5.25% and -1 point to the borrower, the other point of rebate becomes the overage. The borrower pays for the overage in the interest rate for the next five or 10 years, but that's down the road.

Overages associated primarily with rebate loans are an equal opportunity abuse, practiced by lenders and mortgage brokers alike. The only difference is that mortgage brokers who retain rebates from lenders leave a trail in the Good Faith Estimate of disclosure, where it can be discovered by the borrower, although usually too late to do anything about it. Rebates retained as overages by loan officer employees of lenders disappear without a trace.

Defenders of overages argue that they merely reflect the wheeling and dealing characteristic of many markets. They point out that sometimes borrowers turn the tables, forcing loan officers to cut the price below the posted price, which results in an “underage.” The automobile market works essentially the same way.

The weakness of this argument is that almost everyone who buys an automobile understands that wheeling and dealing is part of the game, but many mortgage borrowers don't. They are innocents. That's why the number of underages is miniscule compared with the number of overages.

To avoid overages, borrowers must either confront the loan officer or switch to a distribution channel where there are no overages. Confrontation means letting the loan officer know that you know that mortgage prices are not engraved in cement and that you have or will explore other options. If you find this disagreeable, either retain an Upfront Mortgage Broker (UMB) to act as your agent in shopping for a loan or deal with an online lender, such as ELOAN.com or Mortgage.ETrade.com, which do not allow employees to deviate from posted prices.

Also see Loan Officer and Mortgage Scams and Tricks/Scams by Loan Providers/Pocket the Borrower's Rebate.

The Mortgage Encyclopedia. Copyright © 2004 by Jack Guttentag. Used with permission of The McGraw-Hill Companies, Inc.
References in periodicals archive ?
Fund IV and Overage Fund IV will invest from USD 50 million to USD 500 million in a single transaction.
Parties proposing to enter into overage obligations would be well advised to seek the advice and negotiating skills of an appropriately qualified land agent with regard to the commercial terms.
The company will also waive all international call and text overage fees for Sprint, Boost Mobile and Virgin Mobile customers in the U.S.
AT&T and Verizon have made billions by charging consumers overage fees -- and convincing customers to buy more data than they need in order to avoid those charges.
It doesn't limit video on Sprint or T-Mobile because neither company charges for data overages, reports Digital Trends.
Clubs are allowed to field an overage goalkeeper and up to three overage outfield players in the under-21s but rarely do so -- or at least rarely use their full quota.
The three new plans offer consumers a choice of price points - $40, $55 and $65 a month for 2 GB, 4 GB and 6 GB of rolling data and unlimited talk, text and photos along with automatic data overage protection and optional top-up data passes on the company's nationwide 4G + LTE mobile broadband network.
Kone, 31, was eligible as the competition allows three overage outfield players and an overage goalkeeper in the matchday squad, and enjoyed a lively cameo on his return to competitive football.
"The old carriers' shared data plans are just another ploy to push customers over their data limits and suck money out of their pockets with overage charges they can't see coming."
With respect to age, most pupils in all three countries attend classes in which about one-in-three pupils is overage. This is most pronounced in Uganda, where more than sixty per cent of class peers are overage--despite the fact that the country ostensibly maintains a system of automatic promotion.
The GAR can exceed 100% if children who are overage or underage for a given level are attending school at that level.
Overage Cattle: Steers: PS990 Messrs Griffiths, Tredafydd, Sarnau Leading prices: Bulls: Ov Av PS651.66 PS755, PS720, PS585 Mrs Priddey, Caermalws Fawr, Rhydcymerau, Llandeilo PS640(2), PS570 Mr Cullen, North Fawr, Sarnau PS755(4) Mr Alcock, Waunlwyd, Hermon, Cynwyl Elfed.