Recently a piece that was aired on ABC news about mortgages and was brought to my attention. It’s been a long time since I’ve seen something so misleading and sensational about what consumers should watch for when obtaining a mortgage.
The segment features Erin Lantz from Zillow who claims to have saved a couple thousands of dollars on their home mortgage. Erin is Zillow’s Director of Mortgage Business and prior to Zillow, her lending career was at Countrywide and Bank of America, during the subrime era.
If we were back in the subprime era, I *might* believe this piece of “journalism”. However in today’s current mortgage climate, lenders are pretty restricted with what they can and cannot charge. In addition, fees that used to be negotiable and the ability for a loan officer/mortgage originator to help absorb buyers cost were taken away a few years ago thanks to the Fed’s deciding to regulate Loan Officer compensation.
Ms Lantz tells the borrowers that they don’t have to pay for a credit report or an appraisal fee. She also tells them the origination charge is negotiable. This simply is not true. Lenders can only charge the actual fees charged by the credit or appraisal fee and not fees the lender “decides” to charge.
She even states that the banks insurance fee is too high. I’m guessing (because they were not very clear in their reporting) that the insurance fee was an FHA, VA or USDA type of fee due to the amount. The insurance fee might have been for private mortgage insurance…which is also not something the lender can negotiate. In that case, the buyer has the option of different structures with pmi (private mortgage insurance) or they can put more money down to reduce or eliminate the pmi. If the expensive insurance fee was actually for home owners insurance, then it’s up to the BUYER to shop the fee – it’s not the lenders fee.
The segment states how confusing it is that acronyms are used and words are not completely spelled out. I do agree that we have a lot of acronyms and confusing jargon in the mortgage process. It is the duty of the mortgage originator and real estate professional to help the home buyer understand the process, including the terms. We have limited space to work with thanks to HUD’s 2010 Good Faith Estimate that lenders are REQUIRED to use. It’s not an option or a ploy to be tricky.
I recommend that home buyers who are confused with the process (and who wouldn’t be if you’ve never gone through it) attend a home buyer education class. Many are free and some offer down payment assistance. Classes like this take place on a daily basis across the country.
What does Ms. Lantz recommend home buyers do to unnecessary fees like your credit report, appraisal or insurance fees? Why go to Zilow…of course! That’s a little self serving, in my opinion.
When Zillow mortgage marketplace was first unveiled, I had the honor of being allowed to test drive it before it was released to the general public. My issues with Zillow’s mortgage feature is that I was not able to accurately quote fees and that the APRs were not reported to our company’s standards. I made Zillow aware of that and, back then, no changes were made. Perhaps they’re more accurate now? I really don’t know because I don’t have to rely on this method to have clients.
Zillow’s mortgage expert also wants consumers to know that they don’t have to go to a local lender. They can use one on the internet or anywhere in the country. I completely disagree with this advice. When and if something goes wrong with a transaction, a buyer should know where their mortgage professional works and be able to meet with them face to face, if needed. I believe that a local loan originator with a reputation to lose if they do not perform their job, will do far superior work for a home buyer or someone refinancing than a loan officer across the state or who’s just fed internet leads all day long. A local lender who’s not dependent on leads from Zillow (or other internet marketing mortgage companies) cares more about providing service that will earn repeat and referral business from their clients.