Blown Mortgage

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Doc Searls was nice enough to point out that Blown Mortgage took his commentary on Starbucks personally and outlined the ways in which the mortgage industry can start to recapture its soul.  Then my follow up rant on his discussion board got me thinking to how far the industry has really sunk. 

The Problem

The problem with poor customer satisfaction in the mortgage industry (and hence the soulessness of it) is that the problems not apparent until the very END of a long, drawn out process.  When you get bad service at a restaurant you know it.  The server is non-existent, the food is cold, the order comes out wrong.  Instantly you know the service is bad.  It only takes maybe 15 minutes to figure out how satisfied you are going to be with a restaurant.

But imagine if the waiter kept telling you how great the food was going to be; how it was unlike anything ever eaten before; how you were getting an incredible meal at a steal of a price. You are then made to wait in-line for a month at the door and by the time you got in and seated you had invested so much time in getting to the meal that when they bring out a McDonald’s hamburger for $100 you have no choice but to eat and pay.  Such is the lot of many mortgage-seekers.

Instead of food though, its a home.  Hundreds of thousands of dollars.  Now its late bills piling up, a mortgage payment that you’re struggling to make, money needed for food, a child’s tuition, repairs to a leaking roof, income to replace that lost by the disabled breadwinner.  Now do you walk away after a month invested and needing the money?  No way.  And that is where this whole concept of blown mortgages comes from.

Brokers know you can’t walk away after that much time invested.  They know they have you if you are behind in bills, late on mortgage payments, in a bind.  And they disgustingly use it to your disadvantage.

What exacerbates this whole problem though is the enormity of the transaction.  If you have a bad meal, you’re out $50  bucks and when you go out to eat you’ll never go to that restaurant again.  And when you go out you won’t have to listen to 40 restauranteurs yelling your ear that they have the best food at the best price.  You make your decision and eat.

When you have a bad refinance you then are stuck.  You’ve spent a lot of capital, emotional, credit and cash.  You can’t just go out and refi again. Then when you finally can you’re back in the mortgage bazaar with vendors yelling and screaming at you with all sorts of half-truths and flat-out lies.  But guess what?  Hope tugs at you.  The same hope that makes you think that this is your week to win the lottery. And you get an offer from a good, upstanding company and it looks TERRIBLE compared to the shady company’s offer.  The fees look outrageous, the rate looks worse and the APR is sky-high.  The shady company’s offer looks more in-line with what you are looking for, and that rate and no fees - amazing!  You’re trapped again.

Ensure Your Service

So how can you find the honest companies, the rebels that are fighting the evil empire of the mortgage industry?  Here are 5 tips to ensure you get great customer service and a not-blown mortgage:

1. Ask for proof in writing (know which writing is really proof).  Get the broker to send you the Loan Approval from the investor.  Not the GFE, TIL or other documents that are easily manipulated.  Get the approval from the bank.  If they won’t give it to you go somewhere else.

2. Ask for the rate sheet that your loan is quoted from.  A rate sheet is a matrix of interest rates based on credit score, the size of your loan compared to the value of your home (loan to value, LTV), and your mortgage payment history.  They aren’t supposed to share this with you.  Find one that will and work with them.  You’ll be able to see the actual rate you should be getting for your situation.

3. Ask for your credit scores from your credit report.  Brokers can’t send you the whole report (just like at the car dealership) but they can send you the credit score disclosure pages.  Keep these.  You won’t believe how many loan officers quote worse credit scores to make more money on a loan.

4. Ask for the name of the processor on your loan file and get their number.  The loan officer does sales, the processor makes your loan go through.  They are usually salaried employees who don’t have a huge upside to push your loan through - it makes them more objective and honest than the loan officer whose whole paycheck rides on your loan. 

5. Check the Better Business Bureau for the complaint history of the company.  Then look them up with your state’s mortgage licensing bureau.  A quick Google search will help you find the licensing entity in your state.

Those five should help you steer towards a good company and away from a shady one and decrease the likelihood of being on the wrong end of a blown mortgage.

Industry - Start Here

You can read in my first post some of the simple things that you can do to restore some faith in our industry.  Here are a few more thoughts:

1. Do every loan like you are doing a loan for your: mother, brother, wife, sister, husband, best-friend, cousin, grandmother.  You’ll be more pleasant, patient, and fair thinking like this.

2. Educate, educate, educate. If you hear of a rate that is too good to be true, take the time out to educate your customer.  If they are concerned about fees work with them to explain the third parties involved and where you can work with them and where you have little leeway.

3. Explain what can cause changes in a loan up front.  Let them know that an appraisal that comes in lower will change the rate, that a prepayment penalty will affect the amount of cashout they are supposed to get, if their W2’s end up less than they remember, these will all change the loan.  Tell them that on DAY ONE and remind them throughout the process.

4. Call your customers.  Even if you have little news. Touch base at least 3 times a week. Preferably more.  Emails are good, phone is best.  Stay in touch.  Make it a goal that your customer never has to call you.

5. Be there at the end.  When they go to sign be on stand-by to answer any last minute questions and clear up any discrepancies so that they feel comfortable making the final commitment.  Review the final closing documents (HUD, etc.) with them over the phone prior to signing so there are no surprises.

What do you think we can do to recapture the soul of our industry and make people believers again?

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