For those of you that have followed my postings you know that I warn people about going to the “Dark Side” to get their mortgage. The “Dark Side” is those mortgage companies that you see and hear advertising for business all of the time. I realize that we all have business plans and ways to generate business. Advertising is a way to do so, but when it comes at the expense of the client, especially a client that cannot afford to pay the difference then it is not the best way to do business.
On Friday evening I received a call from a lady who was referred to me by one of my professional relationships. She had applied with a local mortgage company and was trying to refinance a loan that she owed $61,000. In her history she has a bankruptcy and she currently lives paycheck to paycheck with no savings. Because she had tremendous equity in her home she is able to refinance with little or no challenges. On a scale of 1-10 with 10 being the hardest, this is about a 4 when it comes to doing her loan. Thus I really can’t justify charging her a premium to do her loan because it would be a lot of work. More on that later, but the local mortgage company had been pressuring her to close this week and call it women’s’ intuition or just a nagging feeling she felt uneasy about closing so she mentioned it to my professional partner and she then called me. When we visited it turns out that the difference in my closing costs and those charged by the local mortgage company were $2,500. Of that $1,640 was a broker fee which was being charged instead of charging 2.5 points. Not only is that rape of a person who cannot afford it but because they are charging the broker fee instead of points the broker fee is not tax deductible. The points at least can be amortized over the life of the loan if they chose to charge points.
It is needless to say that this lady has canceled her transaction with the local mortgage company and is proceeding with Cornerstone. That is why I tell people to steer away from the “Dark Side”!
Now back to the premium for doing excessive work. On Tuesday of this week I received a phone call from a Realtor who was in a panic. Her client had been trying to back out of his purchase contract and the lender he was working with had canceled his transaction. When the client found out he had no legal grounds to get out of the contract and had to proceed or risk being sued he agreed to proceed but could not find a lender that could get him a loan in 2 days. The lender he had applied with was a national lender working his deal out of state and because they have no desire to have a relationship with either the borrower or Realtor they didn’t want to go the extra mile to get the job done. This is the type of challenge I love and I told the realtor and the client that as long as they did exactly what we told them I would be able to close in 48 hours. Since we had to drop everything we were doing to get this loan done we did charge a premium in the interest rate. Instead of making what we normally make we made an additional 1 point. I explained this to the client and they understood completely. Closing happened on time and all the parties were completely satisfied.
So there are times when people should pay a higher cost to acquire a mortgage, but unfortunately the people that should pay a few and far between and the ones that shouldn’t usually make the mistake of going to the people that will take advantage of them either because they don’t have their best interest in mind or simply their business plan does not allow them the flexibility to treat people fairly!
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