As a young boy growing up, I watched WWF wrestling. What boy did not want to emulate Hulk Hogan or the Ultimate Warrior by climbing up to the top rope, jumping off, and body slamming the opponent?
If you were like me, you practiced by jumping off your couch arm onto your sisters or friends. In some cases lamps were destroyed!
Now, I have not tried this since I was 10 and I am not a large man like a Hulk Hogan or Ultimate Warrior. I am 5’10”, about 150 lbs. and most would describe me as a kind, gentle, reserved person. In fact, I have never been in a real fight, but like any human, there are some incidences that get my blood boiling.
One of the biggest things that gets my blood boiling are mortgage brokers/loan officers that are dishonest, greedy, and unprofessional.
These are the people in my industry that give mortgage lending a bad name (equal to a used car salesman) and unfortunately they’re everywhere. I’ve been in the mortgage industry as a San Diego Mortgage Broker for 12 years and weathered some good times and really tough times and I’ve had numerous encounters with these types of loan officers. Despite my reserved personality, I would like nothing more than to climb up to the top rope and body slam them so they are out for the count.
I will share some mortgage broker/ loan officer horror stories that I have experienced or that clients have shared with me, the lessons that can be learned from them, and let’s see if you would want to body slam them too.
1 The “My Rate is .5% better” Mortgage Broker
Over the years I have had numerous experiences with clients who tell me they were quoted a rate that was much lower than the current market rate. In many cases this is from a no name internet based lender or someone who is just trying to capture a client using a bait and switch tactic. This is a very common mortgage broker scam.
You see, all conventional conforming loan interest rates are based on the mortgage bond market the day you lock your rate in. There can be variations in rates of up to .375% from lender to lender. I know, because many times it is my rates that are beating the other lenders, but after a certain point, you know that the rate they are quoting is unreal.
Many times upon further review of the details, the client will find out that that rate was based on paying Points (a percentage of the loan amount added to your closing costs) and therefore was not the great rate they were promised.
Or, they will find out that the loan officer was telling them a rate that was intentionally below what was available to get them to commit to this loan officer, start the process, and then disclose at the time of locking the rate that the current rates are actually higher.
Lesson Learned: If you come across an interest rate that seems too good to be true, most of the time it is. Do your homework and look at the details. Are there any points, how long is the lock period, how does this rate compare to the market? And make sure you are working with a professional who knows what is affecting interest rates on a daily basis. There a plenty of mortgage broker reviews out there to look at.
2 The “No Problem, I can get you approved” Mortgage Broker
I have had several occasions over the years where I was upfront and honest with client’s letting them know that after a careful review of their application and income documentation they would not qualify for a loan at this time. They would need to make some changes or have some time pass.
Occasionally, some of those clients would talk with other loan officers at other mortgage companies who would say, “No problem, we can get your loan approved!” The client would get into escrow, pay for inspections and appraisals, and the loan officer would submit the file into underwriting.
What would happen? A week later after the loan officer had asked for numerous additional documents, he would let the clients know, “I’m sorry, we can’t get your file approved because of ….” It usually was the same reason I had given them 3 weeks earlier and before they had lost $800.
These loan officers did not have the experience or knowledge to look at the file and make the correct assessment upfront before the file went to an underwriter. These loan officers were basically paper pushers. Except for a few who were too embarrassed, these clients came back to me, said, “You were right” and we were able to get their loan closed at a future time.
Lesson Learned: Just because you get a NO from one person and a YES from someone else, doesn’t mean that the Yes is the correct choice. You need to make sure that the loan officer giving you the yes is experienced and knowledgeable about the underwriting guidelines. Many are not! This doesn’t mean that some lenders can’t get loans done that others can’t. I was just able to get a loan closed for a client that 6 other lenders had turned down. It really comes down to the individual Mortgage Broker or Loan Officer and the options he has before him.
3 The “No closing costs, guaranteed” Mortgage Broker
Here’s the thing. There are always closing costs on a loan. There are third party individuals who have to get paid like the appraiser, escrow company, title company, and underwriter. Many loan officers make it sound like the client is getting a FREE loan and there is no trade off.
I have clients tell me that Loan Officer A is giving them a great deal because there are no costs associated with his loan.
There ARE no cost loan options. I offer them to my clients all the time. It is not some special program that only special loan officers or mortgage brokers offer.
The key is that there is a trade off. The loan can have no closing costs, but will have a higher interest rate than it would if the client decided to pay his own closing costs. This rate increase may only be .125% or .25%, but the rate will be higher in order for the loan officer to get a big enough rebate (funds paid by the lender to the loan officer based on the interest rate locked) from the lender to cover your costs.
In many cases this is a great option, but it is not for everyone. It all depends on the client’s long term goals.
Lesson Learned: There is no such thing as a free lunch. Don’t let loan officers trick you into thinking you are getting some special deal. It may be the best option for you, but maybe it is not. You need to compare the cost vs. savings over time and your loan officer should be able to help you with this.
4 The “Retail” Loan Officer
Not all, but many loan officers who work for a retail bank like Bank of America or Wells Fargo will think that they are superior and have the best programs available because they work for a large bank. They will try to throw around the name of the bank as an added benefit to working with them.
This gets me started on my walk to the corner of the ring. In many situations, working with a retail bank can put you at a disadvantage. First of all, they only have their loan programs to offer. They do not have multiple lender options like a Mortgage Broker or Mortgage Banker.
Second, they can’t find the lender with the lowest rate at the time. They can only offer their rate. It might be competitive, it might not.
In addition, many retail banks actually have stricter guidelines and do not approve as many loans. If you do not get approved, you have to start all over with another lender. This is not the case with a mortgage broker or banker.
The retail loan officer will not tell you any of this of course. It doesn’t mean that they are the worst mortgage companies, they just have less choices.
Lesson Learned: Don’t go running to your local bank branch to get a loan because of their size or name recognition. It may actually put you at a disadvantage.
5 The “I only care about my commission” Mortgage Broker
There are still mortgage brokers and loan officers out there that only care about the commission they make on a loan. There aren’t as many as there were during the easy money period from 2001-2008, but don’t kid yourself, they are still out there.
These are the loan officers who put their clients in loans they shouldn’t be in or don’t try to find out what is best for the client. These are also the loan officers who once they find out that they have lost the loan to another lender turn from being a nice, friendly person to an unprofessional, mean, bitter person.
I had a client that had started to work with another loan officer at her local bank who she knew from visiting the bank and was initially very kind to her. She had started the transaction, but then was referred to me by her financial planner because he thought I could offer a better option.
It turned out I could. I got her a .25% better rate and lower closing costs. When she contacted the other loan officer to let him know, he became mean on the phone, calling her names, and then hung up on her. How can a professional act like this? Beats me!
I have had clients start working with me and then decide to go with another lender for one reason or another. It happens in this business. I wish them the best of luck and always keep it professional. You never know when they may need your services in the future.
The problem is, these loan officers are not looking at what is best for the client or what is the right thing to do. They are looking only at their commission. Don’t get stuck with someone like this that can be the worst mortgage broker or loan officer to work with.
Lesson Learned: It is important to work with loan officers that have integrity and are looking for a long term working relationship. They are not in it for the commission from one loan, but rather looking out for what is best for the client over a long period of time.
6 The “I will break any laws I need to” Mortgage Broker
There are mortgage brokers and loan officers out there that will do anything they can to get a loan closed. You might think that is a good thing, but not when it includes lying and fraud.
These are the loan officers that upset me the most. They don’t want to play by the rules everyone else does. They are dishonest mortgage brokers. I will not break the law to get a loan done. That is not the way I conduct business.
I had a buyer who was referred to me. After reviewing his file I notified him that there would be an issue getting his loan closed because he wanted to use “Cash Funds” that we could not source. Any funds used for down payment have to be shown to be the clients or gift funds. We could not do this for this client.
I later found out that this same buyer went to a different loan officer with the same circumstances and “magically” they got the loan approved. I have heard stories of loan officers creating false bank statements, deposit slips, and income documentation to get loans approved.
Lesson Learned: There are mortgage brokers out there who will do illegal things to get loans closed. It is not worth going to jail for loan fraud to get a mortgage. It is actions like these that caused many of the issues with the housing market that we are still recovering from. Find a loan officer who is going to abide by the rules.
7 The “I like to Churn” Mortgage Broker
No, this is not some new dance like “twerking”. This means that a loan officer will put a client in a loan so they will be able to refinance them over and over within a few years. Again, this is done to benefit the mortgage broker and not the client.
An example of this would be putting a client in an ARM (adjustable rate mortgage) instead of a fixed rate mortgage solely because they want to be able to refinance their loan in the future. This is not to say that ARM loans are bad. They have their purpose and are great for some clients.
But over the last few years with fixed rate mortgages being as low as they have been, I have had very few occasions where an ARM loan was the better choice for a client. For experienced borrowers or on jumbo loans, an ARM might be great, but a first time home buyer should probably stay clear.
These loan officers are steering their clients into shorter term loans for their benefit, not the client’s.
Lesson Learned: ARM loans do have a place in the market, but it should not be to benefit the loan officer’s wallet. Be sure that the loan you are choosing is right for your needs and you are not being directed into it just so the loan officer can do another loan. The mortgage broker/loan officer needs to explain to you why this loan program is the best for you.
Have you ever had a bad experience with a loan officer that you wanted to body slam? Break out your hulkamania tank top and Ultimate Warrior face paint and share in the comments below.
If you would like more information, you can contact me at 619-312-0612.