Mortgage Broker Overpromising and Underdelivering…

Can a mortgage broker overpromise and underdeliver? I wanted to share a story about a client who used my services for his mortgage when he purchased his home three years ago.

The story started OK

On his recent refinance he said he “had to go with the best terms he could find.” It seems his purchase loan was too important to leave to chance, but now he was ready to use almost anyone as long as they appeared to have the best terms. He talked to a lender who was referred to him as “one of the best lenders I have ever seen.”

This referral was by a local Realtor, so the client figured it was a safe referral. And this “best lender” offered an interest rate and a loan-to-value that I nor anyone else could match. I am not sure how that is possible when I represent almost 50 banks and lenders, and I happen to know that Fannie Mae currently did not allow an 80% loan-to-value on an ARM loan and that the maximum was 75% LTV, and what the other lender was offering was an 80% LTV loan that was .25% less than the best rate I had found.

What happened?

Two months later the loan officer told my client he made a mistake and misquoted, and the borrower had to take a higher rate, and they needed another 5% equity. So suddenly the interest rate jumped up to the same terms all the rest of us were offering, and the LTV was indeed 75%, not 80%. Quite a mistake. Then this lender stopped returning my former client’s calls. Then my client had to call the branch manager of this lender. They said they could not correct the problem, and could not meet the original terms quoted, and they were sorry, but that was that.

Have you experienced this?

Do you ever find you get your calls and emails returned quickly when a lender is making the sale, but then during the transaction that changes once they have won your business? Tired of no return calls? Tired of terms that change prior to settlement? Tired of delays? Then don’t shop based solely on price. When you pay less you get less. You should shop service every time, as well as price.

Get more for less

People strive to find ways to get people to pay a fair price for a service or product that they are involved in directly. They know what it takes to deliver a certain product/service, and they know what they need to make a fair profit. Then they seem to forget that lesson, and all common sense goes out the window when they go to buy things for themselves, and they shop based on price alone. And then they wonder why problems, delays, and cost over runs happen. The baker insists on getting a fair price for his bread, but then turns around and wants a mortgage that is the, “rock bottom price.” Hmmmm.

Conclusion

Please remember that a mortgage is an incredibly complicated transaction, with rules and compliance requirements I could never begin to convey in these blogs. Shopping on price alone is a guarantee to yield problematic results.

For good ideas on questions to ask and other things to shop for, when shopping for a mortgage provider, see this blog.