MortgagesUndressed

Our company was fully in place on January 4th, ready for our loan officers to start writing loans. Eight days later we see the evidence of an industry still endowed with crooks.

I use a harsh word crook here, you tell me if it is deserved.

It involves a purchase, of course a milestone event for a family. One week before the contract to purchase has arrived the closing documents are ready to sign. In our state we mostly use escrow companies. We were not the lender in this case but were contacted by the buyers/borrowers in a panic.

The buyer/borrower found out at escrow they were being sold a loan with a pre-payment penalty. This had never been discussed with their loan officer and had never been disclosed. They do not have low credit scores which sometimes causes the type of loan where there is a pre-payment penalty. There is no reason for this penalty, except when one is sold, a rebate can be earned by the loan officer.

Rebates are not always obvious on the closing papers.

The callers were upset and wanted our office to take over the loan. This is a bad idea with a week to go for closing, very risky that it cannot be done in time. They were told there was a back up offer on their house and they had to take this loan or lose the house. Were that true, which it turned out not to be, the house could be lost to the backup offer. We told them to fix the loan and stay with the current loan officer.

Our office suggested they ask the closer if there was in fact a rebate to the mortgage company. There was.

In inquiring about the actual lender etc. it turned out to be one we are approved with, even have had a very close business relationship with. We were able to confirm to the borrower the solution was simple. Remove the pre-payment clause and give up the rebate to the lender.

Here is the secret to how these crooks work. With one week to go, they believe you will cave in. So the crooked loan officer called the borrowers bluff, refusing to remove the rebate and the prepayment penalty. He was banking on emotion and the threat of losing the house to pad his pocket.

The borrower here refused to sign, refused to do business with this loan officer. They walked out, even willing to put their earnest money at risk.

The story has a good ending. The sellers have moved out. It is better for them to take this borrower, give them a two week extension, than to find a new buyer. Extension granted - new loan submitted by us the same day.

So the greedy crooked loan officer lost the bet.

I hope the lessons in this story are obvious. Even to the loan officer. I expect a complaint to be filed against him. Washington State has no tolerance for crap like this. It wouldn’t surprise me, as loan officer licensing is just being started, that this bird loses his license before he receives it in the mail.