Don’t be somebody’s whale

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"Whale" noun. a loan officer’s dream client. A person who refinances over and over and over again. Doesn’t shop for rates, terms or programs. Usually owns highly leveraged property and has spotty income or asset documentation.

Don’t be somebody’s whale people. Sales people love whales – they make huge commissions with out being shopped by clients who have come to trust them. They sell higher rates and fees to make compensation from yield spread premium, prepayment penalties and upfront origination.

They prey on whales because they know they can get a paycheck out of them. Keith over at Housing PANIC has a great post on a story from Reuters about one such broker/whale relationship. If this article gets out I will know a lot of uneasy brokers/loan officers who maintain similar "relationships."

Between 2001 and 2006, the Moorheads refinanced their three-bedroom San Diego home at least nine times, county records show.

But mortgage broker DeAngelo didn’t work for free. Each new loan carried up to $13,000 in fees, along with prepayment penalties, and the Moorheads fell deeper in debt.
As the real estate boom of the last half-decade turns to bust, homeowners like Moorhead say they feel betrayed by brokers who profited from bad advice and saddled them with loans they couldn’t afford.

"It seemed like she was a gift from God or something," Moorhead said. "But she’s a wolf in sheep’s clothing."

I am not saying to not trust a businessperson who can help you out. In fact – finding a trusted mortgage professional is one of the best ways to NOT get screwed; but please make sure you trust them and still hold them accountable. Double check rates, look at closing statements and loan documents. Just because they are someone you are comfortable working with doesn’t mean you shouldn’t look out for you and your family’s best interests.