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Don’t Care Who I Get My Loan From
During
a recent conversation with a prospective borrower,
he told me, “I don’t care who I get my loan from.
I just want the best deal I can get.” I guess
he wanted to make sure I didn’t think he didn’t
care what he paid. Yet I can think of no other line
of thinking that can get a borrower in trouble,
and, in all likelihood, assure that he will not
get the best deal.
Here
are the problems. First, 95 percent of the type
of loans he was talking about are sold either to
FannieMae or FreddieMac. All of the so-called “lenders”
out there are merely sales agents for these two
agencies. So your lender may be called a bank,
but a week after the loan funds, they will sell
it. Their pricing to you reflects the price that
the agencies will buy the loan plus their markup.
Among lenders who are trying to be competitive
there are minute differences between pricing.
In effect, loans are commodities, things with similar
characteristics and similar prices. To that extent,
it makes little difference which company you go
with as the product is the same. But it does make
a huge difference what employee you deal with.
This
prospective borrower assumed that competence wasn’t
important. No so! Many lenders consider the loan
rep job a an “entry level job.” Such people cannot
help you make decisions or help within their organization
if a problem develops.
He
also assumed that the people he was talking with
would tell him the truth about rates and fees.
Again, not so! According to my sources, over 50
percent of the loan reps routinely lie about the
rates that their companies offer. “Ah ha,” you
say, “But I got a Good Faith Estimate of Settlement
Charges.” Doesn’t mean a thing. No one I know
has ever heard of any lender or its representatives
being sanctioned for lying about rates on such an
estimate.
Our
borrower also assumed that other aspects of service
didn’t make any difference. My belief is that there
are well-run, efficient lenders with dedicated people
and smooth running operations. They process loans
in a timely fashion, return phone calls promptly,
answer questions truthfully, and work hard to assure,
for example, that your transaction closes on time.
By
contrast, there are some huge lenders that are bureaucratic
nightmares. You’d rather have the Post Office
process your loan than one of them! One high profile
national lender happens to be located near me and
I have interviewed their employees. They describe
their company as a “sweatshop” whose goal is to
do business with the dumbest half of the borrowing
public. Want them to do your loan too? I don’t
think so.
Finally,
there are places that are staffed by people that
I will call crooks, for lack of a better word.
The moment that they get a deal in, they are trying
to figure out how much money they can shake out
of you. These organizations frequently prefer
to work with “impaired” borrowers who don’t have
as many choices, figuring correctly that they can
make more money off of this class of borrower. You
can correctly assume that the employees of this
type of company are not among the best in the industry.
You certainly don’t want them working on your
loan.
The
natural consequence of our prospective borrower’s
search will be that he will keep calling until he
finds the biggest liar. Of course, that guy will,
more than likely, not be satisfied with even giving
him a “market rate” deal at the end, preferring
to gouge his client. He’ll end up paying more
than if he went to someone honest in the first place.
So
what are you supposed to do? Easy! Shop for
a loan rep, not a lender. If you get the right
person, he or she will guide you through the process
with care, educating you about choices, looking
out for your interests, helping you make good decisions.
You’ll get the right loan and will get a better
deal than the guy who called me. You can best find
that person by asking for referrals from friends
who have recently gone through the mortgage process.
Interview them and put your trust in the one with
whom you best communicate.
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