How Do Good Loan Officers Decide What To Charge You?
I have been challenged on a few old posts with, “what right do you have to mess with what people are charged”? “It is the market that determines that isn’t it?” “Let the market decide what loan officers should charge.”
That is all fairy tale talk. At least with the loan officers I would like to see out of the business. With rebates given for raising rates, including a pre-payment penalty clause, selling a sub-prime loan, or selling an ARM with terms favorable to the bank when the loan adjusts up it is very difficult to let the market decide the money the lender will earn.
Add to that - almost no one will go through a second application. If a liar can get you to fill out the application, you are nearly dead meat.
Add to that - if the liar or greedy loan officer can get you close to closing before you see the numbers he has got you. Too few people are willing to walk, even when getting ripped off.
Add to that - all too many borrowers are in a hurry at closing, just sign without reading.
So the bad ones, they charge as much as possible on each and every loan.
Then there are the stellar ones. The stellar ones are loan officers that are truly professional. The loan officer that can garner the trust of real estate agents. How do they charge?
First of all - they are having enough activity to know what is competitve.
Next - they believe in their hearts that the HUD 1 closing statement is an indication of their integrity. First of all it will match the Good Fatith Estimate for costs. It will match the lock sheet for rate and fees. These loan officers assume that the real estate agent for both sides of the sale, the borrower and everyone the borrower knows will some day see the HUD 1. They know that if there are thousands of dollars in rebates, someone will see them and judge them. They know their reputation is on the line, and more importantly their ability to get referrals and repeat business.
So in summary, how do good loan officers decide what to charge you? They charge what is competitive to the marketplace. The difference in a good loan officers methods, there are no tricks and there is full disclosure.
While I’m not necessarily convinced that transparency is the cure for the problem of greedy loan officers, there are clearly good LO’s and bad ones. The challenge for the consumer becomes differentiating between the two.
>They know their reputation is on the line, and more importantly their ability to get referrals and repeat business.
This is a key point. Good loan officers view this business as a career. They work hard to create lasting client relationships that generate repeat/referral business.
Bad ones see it as a job where they can generate high commissions by tricking the client. But the truth always comes out, and the bad loan officer must continually find new blood or must find a new job.
That suggests that asking the consumer is best served shopping by reputation and experience rather than price.
Lar - you really undressed this one!
Right on Marc.. Yeah hate to have to do it Teresa.
“While I’m not necessarily convinced that transparency is the cure for the problem of greedy loan officers”
true, imagine if we removed transparency from everything…
Matt, thanks for dropping by. several factors make home borrowers extremely vulnerable to lenders, factors that are unique to lending. how to get a rebate and hide it are a couple. lar
PS: LJ has been looking at some of your tools.