Overage

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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.

overage

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

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.

References in periodicals archive ?
The analysed alloy was heat treated to overaged state through the combination of optimized solution annealing at 823 K for 4 hours, water-quenching, and optimized artificial ageing at 573 K for 5 hours.
The tensile elongation of alloy in the overaged state was increased 1.7 times (to 17.1%) in comparison with the as-cast alloy state, and furthermore, the strength of alloy did not decrease.
The fragmentation of eutectic Si particles induced by a high degree of deformation reflected in a slight decrease in the average size of Si particles evaluated in the X-plane (from 3.0 to 2.5 [micro]m) and a slight increase in the number per unit area at a half in comparison with overaged alloy state.
The application of the ECAP technique led to the significant increase in the strength of overaged alloy.
(3) The application of pre-ECAP heat treatment to overaged alloy state led to the significant increase in plasticity of the alloy without decrease in the alloy strength.
Caption: Figure 4: Microstructure of AlSi7MgCu0.5 alloy in overaged state observed by (a) LM after etching and (b) SEM after deep etching.
Caption: Figure 5: X-ray diffraction patterns of AlSi7MgCu0.5 alloy in overaged state: (a) major phases; (b) minor phases.
Caption: Figure 12: The stress-strain (R-e) curves of AlSi7MgCu0.5 alloy in as-cast, overaged, and ECAPed state as a result of the tensile test at room temperature.