The Motley Fool Discussion Boards
Personal Finances / Buying or Selling a Home
|Subject: Perils of Trusting Internet Mortgage Brokers||Date: 9/5/2002 3:18 PM|
|Author: millerpim||Number: 46813 of 128196|
Some of us have to learn lessons the hard way. The smarter of us learn from other's mistakes. Unfortunately, I had to learn from my own mistake. However, I would like to spare others the agony of my experience, which is why I am posting this warning.
As many of you know, I have been in the process of buying a home in California and working with a few mortgage brokers, some of whom post on this board. My main concern about obtaining a mortgage was finding an ethical broker who would provide me with the fastest loan and easiest loan qualification since my two-income household had abruptly changed to one income, and I wanted to avoid last-minute surprises.
Warning Sign #1:
The loan package you receive is not specific to your loan request. Instead, the broker sends you a generic loan package filled with requests for items that are not pertinent to your loan.
Warning Sign #2:
The mortgage broker blows a gasket when you ask her to explain why the GFE contains high underwriting fees and discount points that you did not agree to pay.
Warning Sign #3:
The mortgage broker tells you that she has deducted part of her commission from the discount points on your behalf. Nobody is working on your behalf.
Warning Sign #4:
The mortgage broker decides you ask too many questions, the answers to which she may fear you'll bring up in a public forum and dumps your file, even though you've got good FICO scores, plenty of assets and a good credit history.
Warning Sign #5:
You may have heard the mortgage broker tell others over and over that he works for the borrower, will get the borrower the best rates available and will not receive additional compensation from the lender (a/k/a: kickbacks). But then the mortgage broker sends you a "standard" mortgage agreement that specifically states:
a) the mortgage broker does not represent the borrower
b) the mortgage broker cannot guarantee the borrower the best market rates
c) the mortgage broker is free to receive additional compensation from the lender.
Warning Sign #6:
You receive conflicting information or information is withheld from you such as you apply for an 80% LTV mortgage and all of a sudden are told that mortgage is not available, you will have to do a 75% first mortgage with a 5% second mortgage.
Warning Sign #7:
If you can't receive a straight answer about the specifications of your loan. Some days the interest rate is 4%, other days it is 5% and the market hasn't fluctuated.
Warning Sign #8:
When pressed, the mortgage broker admits the interest rate on your second mortgage could climb as high as 18%, but later pooh-poohs that statement and tries to make it sound unimportant.
Warning Sign #9:
All of a sudden, you discover your mortgage will contain a prepayment penalty.
Warning Sign #10:
If your Good Faith Estimate reflects impounds when you specifically requested no impounds on an 80% loan, and you are told it was a mistake. Or if later you find out that the mortgage broker doesn't deal with any lenders who will fund an 80% loan without receiving an additional rate for eliminating the impounds. And on top of that, it is unclear if that additional rate is lining the mortgage broker's pocket or the lender's.
Obviously, I am talking about my experiences with Catherine and Dave. In all fairness to Catherine, when she decided to dump my file, it was over the GFE. She thought I would be a headache to her, questioning every fee and insisting that the garbage fees be eliminated, and she would have been right.
As for Dave, when I filled out his loan application package, I did not return the so-called "standard mortgage agreement," because I ripped it up. That was in June. I asked him later if he needed a commission agreement signed by me, and he said, no, that my signature on the GFE supports his commission and that's all he needed.
All of a sudden, in August, when I start questioning the type of loan he has switched me on me, he tells me he needs a standard mortgage agreement signed. And all of a sudden, he has SURPRISE, a different kind of agreement to choose from. When I told him that he wrote me an e-mail saying he didn't need a commission agreement at all, reminding him