When are you obligated to a Loan Originator?

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Commitment…ah hah!  I bet I just lost have of my readers out of fear from that oneMpj038482500001  word!  We’ve had a series of post recently at Rain City Guide that has developed some very interesting comments and dialog.    Here’s are excerpts from a recent post of Ardell’s:

Me:  “…if a buyer comes to you with a lender and has gone through the preapproval process, you might steer them to another one?”

Ardell:  “Absolutely YES….Are you suggesting that the “pre-approval” comes with some kind of “obligation” to use that lender? “   

A response from a real estate agent like this should not surprise me…but it did.  This probably served as a much needed personal wake up call.   I know when consumers are shopping me…and I have worked with a few real estate agents who have counseled their buyers to shop.   They call me with the same script almost word for word, “All I want is a Good Faith Estimate…”   I believe this agent (it’s not Ardell) is using my GFE to keep her preferred lender “honest” with his rates and costs.   

As I’ve mentioned many times in this blog…odds are you cannot successfully shop interest rates–they are a moving target and change throughout the day.   Any Joe Schmo L.O. can quote an enticing rate to get you drooling and then…when it’s time to lock (assuming he’s really locked in the rate and not gambling it) you may have your real rate.   At closing, with Joe Schmo L.O. you’ll discover your real closing costs.   (Always bring your GFE to your signing appointment).

The big issue I had with the post was the practice of going through the steps of getting preapproved with a Mortgage Professional just to drop them at the curb when you have a bona fide transaction.    Ardell brought up an excellent question though, when are you committed to a Mortgage Professional?

When somebody contacts me for the first time.   I’ll ask them a few questions, including what are their expectations of me at this point in time.   Some just want rates, have questions or would like to have an idea of what they qualify for.   This takes anywhere from five minutes to a half hour.   I certainly hope that I’m beginning to develop a relationship and to show the client that I’m worthy of their business…but if they move on and elect to work elsewhere, that’s fine.   There is no commitment at this stage.   You’re just dating and getting to know each better.

Once you decide to move forward with a preapproval, if you are working with a Mpj042298200001 Mortgage Professional who has been referred to you, they are responsive to you, have earned your trust and you seem to have a decent relationship…I think you should “commit” to them.   With the preapproval phase, you’re providing a Mortgage Professional with all of your income documentation for the past two years, savings and assets and allowing them to delve into your credit history.   The preapproval process may take hours or it may take days (depending on the situation).    This is a lot of work for Mortgage Professionals…and yes, this is what we do for a living.   Keep in mind, as much as a Mortgage Professional would love you to feel like you are their only client, we are often juggling quite a few transactions along with various potential buyers who are just interested in quotes or are in the “dating phase” as I mentioned above.   

Once you are preapproved, the Mortgage Professional issues a preapproval letter in the buyers name stating they have gone through all of these steps and are committed to providing the buyer financing.  We know this is not the perfect and that commitments from unsavory lenders or individuals are worthless…however if you have a solid Mortgage Professional, you as the client should honor that commitment as well.    In addition to the time spent with the preapproval process, there are often countless emails, phone conversations, letters…you may have several weeks invested into each other.    You are “going steady”.   Please don’t date other LO’s behind your mortgage professionals back…at this stage.  If there’s something you’re not happy with, communicate with them or move on before spending more of their time and resources.

 

 

Mpj042847600001 Once you find your home and have an accepted offer (signed around purchase and sale agreement)…I hate to say the “m” word…if you’re still reading this…but you’re almost married!   After a lot of hand holding, late night chats and frequent emails together, your transaction is coming to fruition.   By now, you should really know your Mortgage Professional.   If you doubt your rate when you’re locking in, you can always ask them.   Tell them you noticed xyz rate at the bank this morning…what ever…kind of a “is that a blond hair on your collar” check. 

My point is…in this post that is all ready too long (my apologies), when  you have a signed around purchase and sale agreement on your home is NOT the time to begin shopping for lenders.   Especially if you all ready have, as Brian Brady put it, used someone else to do all of “the grunt work” to get you preapproved.   Now is when the Mortgage Professional who has worked with you to get your loan approved really has a chance to do their job and see your transaction through to closing.   

And, ideally, I hope to maintain my relationship with my clients long after closing.  I hope they will continue to rely on my expertise when they have mortgage needs in the future, whether that just be a simple question or if they need to refinance or buy their next home.   

This is a relationship business and it’s a two way street.  If you expect to have your Mortgage Professional to be devoted and available at your beckon call, shouldn’t they be able to have a little faith in the borrower?   

Comments

  1. Rhonda – Great post today!

    I have a question for Ardell.

    Does he feel the buyer has an obligation to him if he had gone out and found a property for them and upon getting pre-qualified the lender talked him into going with another Realtor?

    Subsequently, what if the lender told the buyers s/he had an obligation to refer them to two other Realtors?

    Our, what if lender suggested the seller list their home with a Realtor that had the lowest listing fees?

    I’ve actually asked these questions to Realtors and it is amazing how their perspective changes.

  2. Excellent questions, Tony. I’ve forwarded a link to the post Ardell did on RCG. I’m hoping she’ll respond to you. My track backs don’t seem to be working correctly…are you having issues with track backs (since we’re both Typepad)?

  3. Rats! Tony beat me to it. If I was venting I’d say something like “I think I am going to start suggesting that all buyers look at Redfin and similar companies and negotiate their agent commissions since we are in a tighter market.”

    But since I am not venting I have to say that while I wish that borrower’s would commit to us it is tough to make them do so.

    Rhonda, your points about when to shop for a loan are crucial. Too many times borrowers look at small differences on the GFE (a hundred dollars here or there) between competitors AT THE LAST MINUTE and base their multi-hundred thousand dollar decision on those hundred dollars; often to their detriment.

    When Realtors take a customer who is prequalified and use their position of authority over the transaction and face-to-face rapport building advantage over the oft-removed loan agent and flips the customer to their lender of choice it puts the borrower in a difficult position. Do they choose ease of working with their Realtor and their lender to get their home (which is what they ultimately want) or do they stick with the LO who prequalified them in the first place. Too often it is the former, and too often it doesn’t benefit the customer. It goes for other elements of the transaction as well.

    For example, when I bought my condo I told our real estate agent (a referral) that we owned a mortgage company and would be using our title and escrow services because we were comfortable with them and the title and escrow officers wanted to see us close quickly and happily. When we told the Realtor this they informed us that they had their own title and escrow and were much more comfortable using them. To ensure a quick close they convinced us to stay with their title and escrow. It cost us an extra $1,000. I fought to get it credited but it is just one example of how the Realtor can tailor the experience to their comfort level to the detriment of their customer, with out the customer realizing it.

    Brian Brady recommends a way to protect against losing customers to realtor flipping by charging an application fee to put some “skin in the game.” I think Brian is a genius but I am of the opinion that we don’t earn our money until we deliver the loan and so I don’t subscribe to the upfront fee theory.

    I do wish Realtor’s would have a more open mind about the lender being brought to the table and would focus on working with the parties the borrower requests rather than just trying to maximize their own comfort level, whether it benefits the customer or not.

  4. Rhonda – I’m going to admit, I don’t know how trackbacks works?

    Morgan – Great points.

    It’s also similar to a builder ONLY giving “builder incentives” if their buyer uses their lender(s).

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