I listen to 97.3FM and am a longtime listener of Dave, Luke, Dori (accidentally listening since 1995), Ron, Don, John, @thenewschick and @joshkerns38. I am so sick and tired of hearing the Cash Call radio ads that every time one of the ads run, I switch over to satellite radio and I’ve been meaning to write this blog post for many weeks so here it goes.
Radio listeners: There’s nothing inherently wrong with mortgage companies that advertise on the radio. This is one business model of many but realize that radio ads are not inexpensive and there are a few ways that a mortgage company can pay for their advertising. One way is to charge you higher interest rates. But wait, how could they do that when they’re advertising low, low mortgage rates?
The answer is one you will not want to hear but I’m going to tell you anyways: The rates advertised are likely NOT the rate that you will get. The rate advertised is for a loan program that only a very small percentage of people will qualify for. People with credit scores above 740. People with lots of equity in their homes, people who want a 10 year mortgage, or in the case of Cash Call, people who ONLY live in the state of California. That’s right, the radio ad that’s running in Seattle comes with one caveat: It’s only avail for California borrowers.
To their defense, the Cash Call radio ad airing on 97.3FM does state that the rate and APR advertised are for a 10 year mortgage but realize that only a very small percentage of people calling that firm will end up with a 10 year mortgage. This might come very, very close to a classic bait-and-switch scheme without crossing over the line but we don’t have enough facts to make that determination. For example, one of the facts we’d need is to know how many people who called in actually chose a 10 year loan v. a 30 year fixed loan. So instead of selling a bunch of 10 year loans, the reason for their radio ad is to motivate radio listeners to pick up the phone and call after hearing the low rate and APR.
So, who’s on the other end of the phone? The answer shows us another way companies that advertise on the radio make money.
Any consumer who is curious about the licensing status of their loan originator can use the Nationwide Mortgage Licensing System’s Consumer Access website to check on the status of a mortgage company or individual loan originator. When searching for the company name CashCall you’ll see many, many licensed LOs, okay that’s good. But dig a little deeper and you’ll notice that each person’s employment history contains many months of unemployment right around the subprime meltdown and lots of jobs held at subprime shops or other companies that only do radio or TV ads…Ditech, Amerisave, Countrywide, and other low wage side jobs outside of the mortgage industry. That leads to the second part of how these companies make money advertising on the radio.
If they can’t offer you the lowest rates they’re advertising, then another way to make money is for the radio-advertising mortgage company to pay their staff a really low fee. This is justified by the firm because…the company is making the phone ring! All the LO has to do is sit there, answer the phone and close the customer. This is loan origination at its worst and if you don’t believe me just simply google: Cash Call Complaints or Quicken Loans Complaints and see how many dis-satisfied customers they’ve left in their wake.
Homebuyers and refinancing homeowners should be wary of ANY mortgage lender that operates out of state and has no physical prescence in your state.
Homebuyers and refinancing homeowners should always check the licensing status of their loan originator here and if their LO is not in the NMLS system ask WHY and ask to speak with their manager. Mortgage brokers and non-depository mortgage lenders must license their LOs. Depository bank LOs begin registering their LOs within the NMLS system this year. Maybe the person on the phone calls himself/herself an intake specialist or a loan arranger. Ask to speak with a Licensed LO. If there are no licensed LOs then you’re probably dealing with a lead generation company and I’ll do a serious smackdown on lead gen firms in another blog post.
Companies like Cash Call and Quicken hire the loan originators who have no client base, don’t want to work hard enough to earn repeat business, only work part time, will work for a low wage, and/or are paid to close deals and not serve the best interests of their clients. Do you want low rates? Go ahead and use one of these companies but you should have extremely low expectations of your rate being as verbally promised or the transaction closing at all. Expect pain and suffering. Some people pay extra for that, but now we’re getting off track.
Do you want your transaction to close? Select a loan originator based on his or her experience and knowledge. Choose a local company with a loan originator located right in your city so you can go into the office and meet with him or her face to face at application. Yes, this will take time. Do you want your transaction to close and also get a fair interest rate? Then that means you will have to invest some time into understanding your options and understanding the documents you’re signing and that means human interaction whether that’s phone, email, text or facebook messages. You will need someone to respond to your questions who knows what they’re doing. It is impossible to be a part time loan originator and serve your clients efficiently because there are far too many changes taking place on a daily basis.
Kiel Mortgage radio ads are great. The radio ads from TILA Mortgage have improved over the years. Best Mortgage’s ads are fine. These are all LOCAL Seattle area companies with local loan originators and company owners who have been serving homebuyers and homeowners for decades.
I notice that on the Cash Call website, and on KIRO 97.3 FM, they’re advertising a “no cost” mortgage loan. Folks, there is no such thing as a zero cost loan. It doesn’t exist unless you’re doing a straight interest rate reduction refinance with your same lender, going through that lender’s loan servicing department and I think it’s even rare that that would happen nowadays with so many banks and lenders immediately selling everything to Fannie Mae or Freddie Mac. Mortgage loans will always have fees and costs involved. Some of those fees will be to the bank funding the loan, other fees will benefit the loan originator helping you, and still more fees will go to third parties. Any company that tries to sell you a “no fee” mortgage loan is lying to you. The fees ARE being charged….they’re just being covered by a higher rate or they’re not telling you about the other third party fees that you’ll pay at closing unless you decide to read the fine print.
So the opening call-to-action phrase on the Cash Call home page is a lie, the radio ads are deceptive and their loan originators are sub-par. I’m sure they’ll make several billion dollars this year, pay a very small percentage of their profits in regulatory fines, and keep on using the radio to find more rate shoppers. It’s a business model that works. Expect more copycats.
should they be allowed to advertise those rates in Washington when they’re only available in California? I think that’s TOTALLY bait and switch.
The media (radio, tv, print, etc.) is not held responsible to make sure ads conform to state and federal law. However, I have had success in pushing the envelope with KIRO radio when a predatory, unlicensed loan mod firm bought air time.
http://raincityguide.com/2009/04/14/jba-financial-group-get-licensed-or-get-out-of-washington-state/
I’m not sure how a publisher could be held liable for what the mortgage company is wanting to (illegally) promote…however they do make judgement calls every day on what they will and won’t advertise.
Our state/national enforcers need to take action to stop this.
Sorry for being dense, but I don’t “get” this post.
“To their defense, the Cash Call radio ad airing on 97.3FM does state that the rate and APR advertised are for a 10 year mortgage but realize that only a very small percentage of people calling that firm will end up with a 10 year mortgage.”
If statistics show that most people buying in recent history did not stay in their home for more than 10 years, which I believe it does, then why not encourage them to do 10 year vs 30 year loans? Why advertise 30 year rates primarily if the % of people living in their homes for 30 years has become nil or close to none?
Ardell, the vast majority of people cannot afford the payments on a 10 year mortgage. The ad probably isn’t advertising a 10 year arm, but a 10 year amortization. BIG difference.
I know Jillayne and I argue all the time, but she finally said something I can agree with…”Do you want your transaction to close? Select a loan originator based on his or her experience and knowledge. Choose a local company with a loan originator located right in your city so you can go into the office and meet with him or her face to face at application. Yes, this will take time. Do you want your transaction to close and also get a fair interest rate? Then that means you will have to invest some time into understanding your options and understanding the documents you’re signing and that means human interaction whether that’s phone, email, text or facebook messages. You will need someone to respond to your questions who knows what they’re doing. It is impossible to be a part time loan originator and serve your clients efficiently because there are far too many changes taking place on a daily basis. ”
The dirty secret of the mortgage business is the best and most qualified loan officers and banks DO NOT ADVERTISE heavily. A sure sign that a bank is shady is if they spend a lot on advertising. This is counter intuitive, but the best in the business rely on word of mouth/referrals from satisfied customers. Referrals are substantially cheaper than general media advertising. No mortgage company that has any longevity or good track record needs to advertise heavily. This is a relationship business and satisfied clients do the advertising for us.
Ask for referrals from Realtors, co-workers, family members. Talk to the LO about how long they have been in business, how much business they close each year, get references from past clients, etc. Absolutely stay away from the Too Big To Fail retail banks.
Yes, you are correct, I was thinking a 10/1 not a “10 year”. I’ve never seen a “10 year” so it didn’t “click”. 🙂
Thanks!
Hi Ardell,
How many homebuyers have you met over the course of your career who selected (and could qualify for) a 10 year amortized mortgage loan?
What about refinancing homeowners? Switching from a 30 to a 15 year fixed is a great decision….for people who can qualify to repay the higher payment when amortized at 15 years.
10 years? That means the payment will be even higher.
Here’s a great Bait-and-Switch case study from the not to distant past that happened right here in WA State.
http://raincityguide.com/2007/12/28/linden-home-loans-charged-with-bait-and-switch-advertising/
When advertising a rate/product that very few people actually selected, the rate/product advertised is designed to bait the consumer and when the consumer realizes that the terms don’t match their ability to repay or the terms are not what the consumer expected, the company switches the consumer to a higher rate loan or more expensive product (30 year amortization.)
We don’t have enough facts to figure out whether Cash Call radio ads are bait-and-switch. But a regulator could do what they did to Linden Home Loans and conduct an audit.
Here is another website:
https://www.mortgageloan.com/mortgage-p/Free-Rate-Quote/10-Year-Refinance.php?PPCID=1&CID=7464295851_S&rate=2.3
I see the 2.25% with no APR in the same size font.
I see a 10 year loan advertised right next to the rate so I’m thinking 2.25% for a 10 year amortization. But I’m wrong. In the fine print below, the payments advertised are for ARM loans amortized at 30 years.
Deceptive?
Jillayne…Russ answered my question. I was thinking 10/1 because who does a 10 year? Though I have had had clients do a 15 year…and recently.
Russ has great advice. Get the referral.
My friend use to work in the biz (single mom) about 10 years ago and made great money. She left because her company was so unethical. It made her sick to see people being screwed over.
Ardell, another point Jillayne is making about this post is that this IS bait and switch… they’re quoting a special deal that is only available in California to Washington state residents… our local home owners have to read the fine print on the website and hopefully catch this… otherwise, they’re calling from the radio ads and/or not seeing the print on the website for the low-low 10 year (which most cannot afford) only to be offered something else…. a true case and bait and switch.
What will our regulators do about this?
Russ, the too-big-to-fail bank that holds my mortgage probably spends millions in direct mail marketing. Every month I get an invitation to contact them for a “mortgage checkup.”
Nice article.
So, this company is spending anywhere from $75 to $150K per month in the Seattle area to advertise ONLY to listeners that have properties in CA?
The only way this makes sense is if they are a massive lead generation provider.
That is, they spend heavily in multiple markets, get the phone to ring, and sell leads to someone that is licensed to lend in WA.
Lead generation services are even scummier, as far as illegal ads are concerned.
I have long maintained the only way to stop or slow down illegal advertising is to create a penalty for the media that profit from selling illegal ads.
Regarding the 10 yr fixed, there are VERY few people that will qualify for them, or can stomach the payment.
Those that I have done were fairly small balances, and were a refi from a 15 yr fixed. In those cases the borrower saved a ton in interest, and got a lower rate to boot. The paydown of principal is pretty impressive from the first payment forward.
Great article, well thought out and explained in plain language that the general consumer can understand. I have had to explain that ad to my clients since it started and tell the client to cehck it out. Once they find that it is not as advertised, they are clients for life.
It does seem out of place that they can advertise something that is not available in the state they are advertising in. Seems like classic bait and switch to me….
Whoa check out this attorney general legal action against Cash Call in California.
http://ag.ca.gov/cms_attachments/press/pdfs/n1788_cashcallcomplaint.pdf
“Defendant has violated and continues to violate Business and Professions Code
section 17500 by making or disseminating untrue or misleading statements, or by causing untrue
or misleading statements to be made or disseminated in, or from California, with the intent to
induce members of the public to enter into consumer loan transactions, and/or to discourage consumers from paying of f the i r loan balances before due, when Defendant knew, or by the
exercise of reasonable care should have known, that these statements were untrue or misleading
when made. Defendant’s conduct in this regard includes, but is not necessarily limited to, the
following:
a. Advertising interest rates or annual percentage rates on consumer loans that are
not made available to the general public,…”
Jillayne, I have often wondered how it is that mortgage companies are even allowed to advertise interest rates. Even if not intentional, mortgage rates are too fluid and too specific to advertise without being misleading to the public.
Russ, I wonder if we’ll both see the day when the gov no longer allows mortgage lenders to quote rates at all. Did you click through and take a peek at the California AG charges against Cash Call? This pretty much tells me we’re dealing with a payday-type lender that now wants to do mortgage lending.
I have mixed feelings about it. Part of me says that it should be illegal for mortgage companies to advertise interest rates. It is just damn near impossible for a mortgage company to advertise interest rates and for the rates to be accurate. There are just way too many ifs, maybes, under this scenario, only in this circumstance, etc. for mortgage advertising to be meaningful to consumers.
Consumer simply are not aware as to how complicated mortgage pricing can be and because they are so woefully ignorant of the mortgage process, it is easy for them to be misled.
On the other hand, if a mortgage company has better than competition rates, there has to be a way for them to advertise their services.
This gets stranger and stranger.
And yet, still the Seattle Times fouls their front page of the Sunday Paper with their ads.
Update: I just completed a formal complaint with the FTC about Cash Call.
Interesting. I am not sure this company is doing this the right way — who can afford a 10 year fixed rate mortgage anyway?
2014 UPDATE: Washington State DFI
http://www.dfi.wa.gov/CS%20Orders/C-11-0701-14-FO01.pdf
Cash Call license to do business in WA State has been REVOKED
$244,000+ fine
6 million dollars in restitution ordered.
Nice article Jillayne. We all know that mortgage rates are too much of a moving target and too situational to be advertised accurately on radio or print media. But people want to hear what they want to hear and “boiler room” mortgage companies need the phone to ring.
As for Cash Call, their roots are in the payday loan industry…..need I say more?