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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 127575|
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 what he said about my signing the GFE, he denied ever saying it. But I saved the e-mail where he said it. I can prove that he said it.
I asked him to tell me the difference between the two mortgage broker agreements, and he said 90% of his clients use the "standard" agreement. Funny, I happen to have a copy of the "standard" mortgage agreement, and it's almost verbatim to the one Dave sent me except for a few HUGE alterations. I pointed this discrepancy out to Dave and asked him why he altered the agreement to appear so one-sided in his favor. He denied that, too, yet here I was, LOOKING at the standard mortgage agreement that California mortgage brokers use and comparing it word for word with the one Dave asked me to sign.
Where the CA agreement says the mortgage broker is the agent of the buyer, Dave's altered agreement says he is NOT the agent of the buyer. He altered it all right, and he lied about it on top of it.
After Dave explained the two agreements, he sent them to me, but I couldn't open the files. I told him I was leaning toward signing the flat fee, providing I could open the file to read it, and if he could deliver a good faith estimate that was solid.
After he sent me a file I COULD open, I told him I didn't think I would sign the flat-fee. This is when he threatened me.
He said he keeps copies of all his e-mails, that I had AGREED to his flat-fee (when I had done no such thing), and that it was enforceable in court.
Needless to say, I was a bit astonished at this outburst from him, especially since I had not agreed to sign it, and I saved the copy of my e-mail where I discussed wanting to read it and receive a solid GFE before I agreed to it. Not only was he threatening me with no basis or foundation for that threat, he was totally out of line.
Dave pushed the benefit of signing his flat-fee agreement instead. He had no response as to why I should pay MORE, in his case, 1.25% versus 1% for the "standard" to keep him honest. There's also the matter of a clause Dave inserted in his flat-fee agreement that gives him the right to renegotiate the agreement at any time. I asked him if he would remove that clause, because otherwise, the only purpose the agreement serves is to line my birdcage. He said, and I quote, "Make me an offer."
No, thank you. I don't do business this way, and I suggest that other Fools protect themselves and refuse his business as well.
In the end, I went to a mortgage broker in California and was immediately preapproved for an 80% LTV mortgage with NO points and NO origination fee at 6 1/8, fixed for 30 years. If I had listened to Dave, not only would my closing be subject to an upheaval and probably not close on time, but I would have a 75% LTV first mortgage that can adjust every six months and a 5% second mortgage that could zoom to 18% interest. Again, no thanks.
For every story that you read on this board about nightmare closings, there are hundreds of others who either don't realize they were taken advantage of or are too frightened to share their experience.
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