Joe Buyer and the Lending Treehouse of Horrors: Part 2
Rhonda Porter on 07 9, 2007
Last week, I began telling you the tale of Joe Buyer who found his low interest rate on the internet and was having [photopress:simpsons4a_small.jpg,thumb,alignright]second thoughts when the loan approval was appearing elusive. This story resumes in the second week of June…the week his purchase was scheduled to close.
The last time Joe and I had touched base, he believed his loan was going to be approved within 48 hours. I truly hoped this was the case for the both of us! Even though I enjoy helping people and earning a living, performing an “emergency rescue” with a transaction is draining on everyone I work with from my processor to the appraiser…and hey, what about me? 
Joe’s closing date was just a few days away and he was beginning to get more odd requests thrown at him from the internet lender including a request to have the appraisal modified to reflect an extra fireplace to increase the value by $200. I’ve never heard of such a thing! Joe’s appraisal came in “at value” (the same as the sales price), why would make an appraiser re-issue the appraisal at $200 above the sales price?
During this week…mortgage rates were climbing. I was now suspicious that the internet lender never locked in Joe’s interest rate…they were gambling or it was a possible oversight. I asked Joe about this and he told me that he had requested a Rate Lock Confirmation several times and the lender NEVER provided one.
With Joe’s closing date smack dab in front of us, I advised him that I should start working on his loan if he wants to go through with his purchase. He has a $15,000 earnest money at stake, not to mention the house that he and his family are planning on moving in to and calling “home”. Joe begins to provide me everything…he is definitely a “full doc” loan. Just as I am ready to plunge into his transaction to get him approved, the internet lender appears again with claims that loan docs will be to escrow soon. In the interest of trying to close on time, ever-hopeful Joe elects to stick it out with the other lender. Rates were still going up. The loan documents do not show up. And Joe misses his original closing date.
A few days later, the first mortgage from the internet lender tells Joe the first mortgage is approved…however; they’re having a difficult time finding a lender for the second mortgage. And, once they do, the lender for the second mortgage does not have the appraiser on their “approved list”. It’s the last straw for Joe.
Joe decides to move his loan and I provide him with an updated GFE since rates have increased quite a bit during that two week time period. Waiting to move from the internet lender cost 0.75% in rate on the first mortgage and 0.3% in rate on the second mortgage.
I have Joe’s preapproval immediately and submit his supporting documents (income/assets) that are required according to the AUS (automated underwriting system)…no more; no less. We have full approval (subject to the title and appraisal) within 48 hours for both the first and second mortgage. I really thought his loan would be tougher, in light of all the hoops Joe went through with the other lender; his approval was very clean. Being self employed, there was a little more paperwork than a typical transaction…but nothing to warrant Joe’s nightmare with the internet lender.
I went to the escrow company to meet Joe and his family before their signing (they flew from California in order to help expedite their closing). While I waited for them to show up, I learned that the other lender’s loan docs for the first mortgage never were delivered to escrow, only the second mortgage showed up! The LO Joe found from Lending Tree had his information for over 2.5 months and were not performing. We closed this loan in 5 business days from start to finish (which I don’t recommend…30 day closings are so refreshing)!
The Buyer family was extremely excited, Joe loudly exclaimed in the lobby of the escrow office, “Rhonda, you’re a superwoman! You should be wearing a cape!”
I truly believe the internet lender gambled Joe’s mortgage interest rates. Second mortgage rates are less volatile than first mortgage interest rates. With the quick increase in rates in early June, locking in his loan would have cost the lender around 3 points, over $14,000, to honor the rate on the first mortgage. Suggesting that Joe had to go “stated income” was a way to try to bump up the rate they could charge (and/or they were incompetent at reading tax returns for self employed borrowers).
The moral of this story is selecting a mortgage by shopping rates alone can be one of the most expensive (emotionally and financially) mistakes you can make. It is so important to work with a Mortgage Professional who knows what they’re doing and cares about building long term relationships with their clients vs. a transactional LO, dependent on leads, who is just looking to close their next deal.
About the Author: Rhonda Porter
- Author's website: http://www.mortgageporter.com
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20 Responses to “Joe Buyer and the Lending Treehouse of Horrors: Part 2”
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this kind of mortgage scheme is important to be heard…Thanks for posting!
Thanks, Leslie. It’s kind of a long post…but I agree, word needs to get out that someone promising a low rate may not be able to deliver anything. It’s especially risky when you’re dealing with an internet lender that you cannot track down or see the “whites of their eyes” if you needed to.
Ardell, ya know…I ALMOST posted a picture of wonderwoman and super-imposed my head…but I just thought that would be too much. I AM LMAOROTH. (I hope I spelled that right)…
My sister in law, Kathy, passed away on Friday…we expected this however, it’s still very sad. You really cheered me up. Thanks for the cape!
I was running out the door to a listing appointment and didn’t have time to write a comment
Figured the pictue would say it all.
Shopping the internet for a mortgage lender by rate only…. will make you end up with the biggest liar or most inept loan officer(like Joe).
Wonderful story. Thanks for sharing
[...] 10th, 2007 · 2 Comments I just read a great series of posts by Rhonda Porter, “Joe Buyer and the Lending Treehouseof Horror: Part 1 and Part 2.” [...]
[...] 1. Rhonda Parker’s, “Joe Buyer and the Lending Treehouse of Horror: Part 1 and Part 2” [...]
Excellent follow up, Rhonda. I have felt your pain with previous clients and know what you mean when you say, “30 day closings are so refreshing!”
I’m sorry to hear about your family loss.
Thanks, Reba. The services are on Thursday and our office will be closed in the morning with a small crew working in the afternoon. Kathy is not only my sister in law, she’s also a co-worker. Mortgage Master is a family owned business.
Rhonda, I’m sorry to hear about your loss. I feel like we’re friends (even if its just podcast friends) and I am very saddened for you and your family.
You make a great point about internet lenders and shopping for interest rates. I think that people’s gut instinct on shopping for a mortgage is completely wrong and actually leads them in to bad situations. People need to stop shopping for rates and start shopping for trusted professionals.
Mortgage rates are commodities – mortgage professionals are not. Shopping for a rate by trying to drive to the lowest rate and lowest closing cost simply pre-selects the most unethical person who is willing to reel you in with unrealistic rate and programs only to pull the above shenanigans on you. Great post about an all-to-often problem in our industry.
Rhonda -
Wonderful story, glad it turned out in the end.
So often since we know how these things will turn out, we tell our “Mr. and Mrs. Buyer” what might happen, and yet they go ahead.
Then, when “The Buyer’s” find out we were right, often times Mr. Pride steps in and stops them from coming back to us.
Good for you!
Permission to link back to this post on my blog?
Pretty Please?
Of course, Mike! Shucks, I’m flattered you even ask.
Morgan, thanks so much for your kind support.
Mike, I’m still thinking about your comment and you’re right. There’s times when I’m transparent, like talking about the cost associated with paying your own taxes and insurance (escrow waiver fee) and the borrower will say, “how come my other lender never charged me”…guess what, they did! A truthful upfront LO can appear to not be straight when they’re in the mix of others who don’t educate consumers or fully disclose options.
Absolutely.
It’s a constant struggle – good vs. evil.
Well maybe not as drastic as that – How about…
“Honest, Ethical, and with their best interest in mind” vs. “everyone else”
You know, I’m a huge Simpson’s Fan.
I loved the double entendre!
Some of my biggest traffic hits come from post I made about the Tree and it’s misrepresentations.
Hi Rhonda,
Sorry to hear about you and your family’s loss…that is very sad for you all.
I think that Morgan’s comment on #11 is right on:
“Mortgage rates are commodities – mortgage professionals are not. Shopping for a rate by trying to drive to the lowest rate and lowest closing cost simply pre-selects the most unethical person who is willing to reel you in with unrealistic rate and programs only to pull the above shenanigans on you. Great post about an all-to-often problem in our industry”
There are too many people who are only looking for making money in the short term (the current loan or RE transaction) who do not care about the long term impact for the consumer and do not care if they ever talk to their “client” again after all is said and done. Professionals who care about their clients long term, care enough to do right by their clients the first time and every time. A truly trustworthy professional is one who is there today and tomorrow, and can be counted on to provide excellent service for a reasonable cost everytime.
Great story Rhonda…I love ARDELLs’ graphic!
Keep it up as the “Capped Cursader” for motgage comsumers!
Unfortunate for sure. LendingTree and other similar site give you the impression that they are passing your information on to banks but they are actually selling your loan application to the highest bidder…up to 4 times.
It amazes me how people will trust the biggest purchase of their lives to a stranger they meet over the internet so they can save a few bucks. Many of them like e-loan are completely outsourced to foreign countries.
The best advice is use someone local so you can meet in person and have access to their supervisor if things dont go the way you expect.
Hooray and Sorrow.
This post should be bookmarked. Actually, it will be. Look for a trackback.
My condolences on your loss.
Thanks everyone! You guys are the best.
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