Apology not acceptable


Last night I had someone (who I thought was a client) email me stating:

"I appreciate your time and help with this thus far, but we’ve decided to go with a different source for our mortgage needs. 

We feel going with someone more local to our area and whom already has a working relationship with our realtor is best for us.   I hope you understand and again, thank you"

Fact is…I don’t understand at all. 

I’ve met with this couple personally twice thus far and we have countless emails and phone calls back and forth at all hours of the day.  I have them preapproved for their mortgage which is a 10% down jumbo that I structured the financing to obtain the best rates for them by structuring a conforming first and second combo.   I have guided this couple and provided them with a strategy for buying their next home together. I have met every one of their mortgage needs.

They hooked up with a real estate agent who used my preapproval letter to secure their home and then did switch-a-roo to her preferred Loan Originator.  It’s a sneaky snakey pass off when everything has been done.  It’s steering the customer. 

How would their real estate agent feel if I would have steered the buyers to another agent that I work with after she has invested the same amount of time with her?  Whenever she called me, I responded immediately.  I never gave her a reason to have doubt in my abilities as a Mortgage Professional.   This is all about steering to her preferred lender.  I wonder if it’s one their company has an interest in?  I also wonder how the Listing Agent would feel if they knew that the lender who wrote the preapproval letter that was presented with the offer is not the lender being used for financing at this stage in the game?   Should a Loan Originator retract their preapproval letter in this situation?  Obviously, I’m not use to someone doing this to me and I’ll get over it.   It’s simply not how I treat people.   

I’m not sure if my bigger beef is with the real estate agent or the buyers.

Why should I understand?  I don’t.   


  1. That’s crummy behavior.

    I’ve not seen them yet, but I think that the new MLS forms require either notification or permission from the seller if the Buyer switches lenders mid-stream or after using a letter of pre-approval from one lender to another.

  2. You just hit my pet peeve! I have written about this exact situation on Activerain on several occassions, of course the resposes are very few.

    My beef is that when my clients indicate they are working with a Realtor, I don’t immediately say call my buddy; he will refund a portion of his commission to you. I assume that the other person is a professional and unless they do something to prove otherwise, I leave it at that and respect my clients choice in Realtor. I think of it as PROFESSIONAL COURTESY.

    Realtors on the other hand are quick to tell borrowers to shop around, call their in house lender, etc. I have thought that I might start telling every borrower that calls me to call up RedFin and compare. After all, I just want to make sure that my clients get the “best deal”

    However, it some borrowers that get me the most. They have no respect for the time you spend with them and what it takes to ensure that their financing is handled properly. The sad part is, they probably took your conforming vs jumbo advice to the other LO who was probably quoting a straight jumbo.

    Karma is a b*tch… the last time this happened to me, the borrowers had to come back to me 1 week before closing because the “preferred lender” couldn’t get the deal done. The funny part is I knew they couldn’t from the start because my borrower had some weird visa issues that very very few lenders will do. I just sat the file to the side and waited. Just like you, I was really pissed because I spoke with the Realtor on several occassions and provided the initial pre-approval only to find out they tried to steer my client.


  3. I think we should start calling listing agents and retracting pre-approval letters. I have never done it, but I have received calls from attorneys looking for loan commitments after the client decides to go somewhere else… of course, I just politely let them know that I am not handling their financing. You can always tell they aren’t too happy that the borrowers chose a new lender mid way through a deal.

  4. Russ, I’m wondering if I should do contact the Listing Agent. They relied upon my preapproval letter to accept their offer. I would assume they would want a preapproval from the current Loan Originator.

    If I were the Listing Agent and/or Seller, I would want to know that the financing is proceeding as planned.

  5. Marlow, I think that change in the MLS would be very beneficial. Especially in our current market in the condition the mortgage industry is!

  6. Another point… Realtors often complain about pre-approvals being worthless. This is one of the reasons why! What loan officer wants to spend hours really pre-approving a borrower (I mean actually getting the loan placed and fully underwritten, not just ran through DU/DO/LP) only to have a borrower come back to you over .125% in rate or have a Realtor steer the client?

    When I do pre-approvals, they are full commitments. I don’t BS around, so it is a big waste of my time when I do a pre-approval only to lose that borrower. I almost wish there was a way to have binding agency agreements on the lender side.

  7. Russ, that is the other point. I do a “full commitment” as well…it’s a true approval viewed by an underwriter. It’s not just wasting my time…there are many people impacted from this. And, it impacts “fall out” ratios with the lender that the loan is locked with. It’s very detrimental to our industry.

  8. I was reviewing the buyer’s emails and came across this gem which they titled “Confirmation to hire you”…
    Hi Rhonda,

    I appreciate your attentiveness, please remember we are not going off a refererral or reference even, but blindly really. Therefore, I hope you find your time well spent on helping us with our questions, for we have decided and would like to proceed with you as our mortgage banker! We found that your quick response and attention to detail and market knowledge is exactly what we want in this individual. I truly feel this will be a pleasant and rewarding collaboration.

    [We} will work on the paperwork over the weekend and scan and email to you asap.

    Thanks again and looking forward to working together.”

    What changed? They found an agent who had her own game plan with their financing.

  9. We’ll Rhonda, we all go through it. But to make you feel just a tad bit better, we had a sale transaction where the borrower “fired” the LO within a week of closing. This was about two weeks ago (and a different one from my comment at RCG).

    $1 Million dollar loan. $1Mill ++ purchase. Was the LO ticked off? Oooooh Very.

    Who was the first to be notified? Yep, escrow. Talk about being put into the middle. Not fun.

  10. Yuck! I’ve heard that some buyers are doing “double applications”…is it because they’re afraid one lender might go away before closing. These are odd times indeed.

    With you being in escrow, you do see the same thing where the agent wants “their escrow”.

    Maybe who the lender is should be written in on the contract as it is for the escrow company. The lender does not service the Seller…however, a bad lender could be a disservice for all.

  11. That is just awful. I’m so sorry to read this. Unless the lender working with my buyers is showing us that he or she is a problem, I always try to support that relationship. And usually it goes both ways.

    It’s cruddy that the agent did the switch. Makes me wonder if it isn’t to an in-house lender where the company makes money on both sides (or maybe the agent got some sort of referral fee).

    Slimey, slimey, slimey.

  12. rhody gath says:

    This blog post does not mention the pricing of the pre-approval loan. Do lenders always give pre-approval applicants a GFE? I was pre-approved for a loan with a lender I had used for several refi’s at competitive rates. When I presented a contract to the lender the rates were not competitive. If the lender who pre-approved me offered a competitive rate and closing costs I would happily use them. But should I really feel a commitment to use this lender even if their costs are not competitive? Did the lender who pre-approved assume that I wouldńt know their loan costs were inflated? Only a fool would assume that their pre-approval lender were offering them a competitive rate.

    • Rhody, mortgage rates are based on bonds (mortgage backed securities) and may change throughout the day. Typically it may be price adjustments (ie the rate is the same but the cost or rebate credit is different). It’s similar to stocks. And yes, one day, Lender A may have better pricing than Lender B and THAT too can change day to day depending on who the loan originators have for lenders to work with.

      The closing cost to the loans should not change much from “preapproval” to being in contract – however, it is possible that mortgage companies adjust their cost while a buyer is shopping for their home. Our company may adjust cost once a year or so as the cost for doing business changes. When I have clients who have been hunting for a home for a long period of time (like a year or more), it’s possible that our fees may change and I’ll reflect that on their updated quotes. Rate quotes are estimates.

      When shopping lenders, borrowers should see if the lenders rates are competitive and how the closing costs compare. There should be less changes with closing costs during the process.

      Home buyers who have taken time to research loan officers, to find the person who is going to help them with the financing of one of their largest transactions in their life are not foolish. There is a lot more to a transaction then jumping for a lender who appears to have the lowest rates or cost. I receive tons of emails from home buyers who opted for that route only to have a hellish transaction and/or to have their transaction not make it to the closing table.

      Home buyers should make their best efforts to select the lender they want to work with before they are in contract. I know this doesn’t always happen…and I appreciate it when home buyers let me know they’re shopping or considering another lender. This helps me prioritize my efforts with my clients too.

      I wrote this post in 2007. Since then, there have been a lot of changes to the mortgage industry, including that with the good faith estimate. I would hope there would be less variances to changes to closing cost now.

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