I actually thought this piece of mail was legit…until we opened it.  This piece of junk was threatening of a possible fine and imprisonment OR BOTH if anyone interfered with it’s delivery.

Once you open the mailer, you quickly see that it’s from a mortgage company that is so desperate, it must utilize trickery to try to obtain new business.

We have good news about your loan originally funded at:

MORTGAGE MASTER SERVICE CORP

After reviewing your account history we are happy to inform you that you have been preapproved for a new mortgage at a lower monthly payment.  This offer makes you eligible for a modified mortgage at a lower monthly payment regardless of credit, mortgage payment history, or other financial hardships.  If you are in an adjustable loan, this offer makes you eligible to convert to our fixed product line.

There is no rate in this promotion…however it actually states that we’ve been preapproved for a new mortgage with a lower payment.  What a bunch of baloney.

When I receive a piece of junk mail such as this, I forward it to the Department of Financial Institutions in Olympia.  I hope you’ll do the same too.  Misleading advertising in mortgages must stop.  I encourage you to forward your mortgage junk mail (Washington State only) to:

Enforcement Unit, Division of Consumer Service

DFI, P.O. Box 41200, Olympia, WA 98504

Please don’t ever select your Mortgage Professional by something you receive in the mail or hear on the radio.  And remember, rates that are advertised in radio and newspaper print are not current.  Rates change constantly (especially these days).

You would like to think that with all the licensing and tougher times, that all the mortgage riff-raff have gone back to selling what ever it was they did before…it’s not true…not yet.   In fact, it was recently announced that during the first quarter of this year, there’s a record amount of mortgage fraud.  At first, I was surprised to hear this but after you think about it, it sadly makes sense.  With less business, some mortgage originators become more desperate and make poor choices…the same holds true for borrowers who "need" a mortgage but don’t quite fit today’s guidelines.  They’re both willing to do "what ever" to get a mortgage loan.

Here are a few actual scenarios I’ve come across recently that you may want to look out for.

Inflated home values.  Recently a mortgage banker confidently told a borrower looking to refinance their home that it was worth a higher amount than what it actually was.  Most mortgage rates are based on loan to value, so a rate at 80% LTV is better than one at 81% or higher.   Mortgage originators do not know the value of your home until it has been appraised.  We have some tools available, but they are not guaranteed.   Watch out for originators who state your home is worth more (even if you really want to believe them).  You may want to ask them how they arrived at your home value.

Non approved FHA lenders.  FHA mortgage loans are hot.  In fact, a majority of my loans are currently FHA over conventional.   Ask your mortgage originator if they are approved to provide FHA financing.  A big clue if they are not is if they are charging you an origination AND a discount point (often used to pay a lender to fund the FHA loan for the unapproved lender)–this is a RESPA violation (illegal).   Inquire on how many FHA mortgage loans the mortgage originator has personally closed and how long they’ve been providing FHA financing.   You don’t want to get wrapped up in a transaction only to learn your lender can’t complete the loan. 

Another predatory trend that I’m spotting are loan originators who collect a fee for assisting a home owner in need with a loan modification.   If you need help with your mortgage, PLEASE contact a HUD approved counselor or Hope Now before your pay a mortgage originator to refer you to an attorney.

Last, this isn’t really predatory in my book, but definitely something for borrowers to keep in mind: if a mortgage originator does not have a competitive product available to you, such as a second mortgage/HELOC or FHA loans; they don’t have to tell you.   You may seek out a mortgage originator to provide a certain product and instead of them saying "I don’t have a competitive HELOC right now, you might want to check out XYZ"; they may say, "lets look at your first mortgage and do a cash out refi".  Don’t get me wrong, a cash out refinance may actually make more sense than a second mortgage–just don’t do one because the LO is trying to make a paycheck.   I’ve recently referred a past client to check out a credit union for a small second mortgage…I wish I could do the loan and keep my client contact–however, I simply  don’t have the product right now and I know their first mortgage rate is too low to refinance.   

It never hurts to get a second (or third) opinion if what you’re hearing from your loan originator doesn’t seem to make sense. 

There may be a solid reason if something doesn’t pass the "smell test".  Trust your instincts.

Here’s a new one for you from the Mortgage Porter Junk Mail Bag.  This gem arrived to us in a hand addressed envelope about the size of a greeting card with real postage stamps but no return address.  What a personal touch. 

But wait…there’s more!  When you open the envelope it appears as though someone has cared enough about you to send you a newspaper article and there is a written sticky note that says:

"Robert, Try this it works!  I just got two months no bills! [signed] J."

Wow, who is this "J"?  Their name is no where on the envelope and there’s no business card included.   The newspaper article is front and back (with a faux-ad of a hottie on both sides) appearing to be an interview of someone in the mortgage/credit repair profession.   The "professional" being interviewed is here to save the day…the article never really says how but invites you to visit a website which I’m not going to promote here. 

The website would leave you to believe this fella is on your side to fight the bad mortgage companies, credit counselors…he’s going to teach you every trick in the book after you sign a non-disclosure statement so his "methods can stay secret from the general public".   

The entire campaign is aimed at people who are in trouble financially either from an ARM adjusting or from too much debt.  It’s predatory.  Do you remember just a few weeks ago what I said about loan originators who use "skip two months payments" as a ploy to get your business?

I have an issue whenever anyone uses "trickery" to obtain business.  Especially when it’s as important as the financing of your home.   This "article" does state "ADVERTISEMENT" in small print on the top of both sides…but it would be easy to miss.  Especially if you’re in a tough position with your mortgage or debts and you’ve received this mail from someone who cares enough to take the time to hand address a note to you. 

I truly believe that those who must resort to doing this type of deceptive marketing is because their business practice is such that they do not have returning or referring clients. 

Please don’t ever select your mortgage professional by the junk you receive in the mail.   

I don’t mind losing a prospect (someone who’s shopping rates) to a fellow Mortgage  Professional, I do have an issue when I feel the shopper is being fooled or mislead by a loan originator.  Late last week, a "prospect" who had been asking for various scenarios kindly informed me that they decided to go to another lender who was offering a better rate.   Not a problem.   I do like to find out why and what was better than my Good Faith Estimate. 

The scenario:

• 30 Year fixed rate/cash out refi
• $417,000 loan amount with a home valued at 1 mil
• No points (typically a point/1% of the loan amount equals 0.25% to rate).
• No reserve account (this cost 0.25% in fee).
• Full doc for a self employed borrower with excellent credit
• No prepayment penalties

My Good Faith Estimate dated January 17, 2008 factoring in all of the above provided a note rate of 5.750% with an APR of 5.800% with total closing costs just shy of $2750 (title, escrow appraisal, etc).   Note:  I pride myself on having my GFE being as close to the final HUD as possible.  In fact if anything, I’d rather my estimate be higher to start with and have my client pleasantly surprised with lower costs at closing (instead of the alternative).

The prospect selected another lender who’s quoting 5.25% with a total of $4,000 in closing costs.  I have searched all the lenders I work with and I have also checked out local credit unions.  I can’t find this anywhere!   5.25% may be available at a minimum of 1% discount/origination fee.  1% in fee would place the cost on this loan at $4170.  Then factor another 0.25% in fee ($1042) if the client opted to pay their taxes and insurance on their own.  How is the title, escrow and appraisal going to be paid?  This just does not pencil out. 

It smells a bit fishy to me and this type of volatile market may be tempting for some LO’s to "gamble" the market…betting (and praying, or should I say preying) that rates will improve to match what they have told a client they are locked in at.   It’s a pricey game that some LO’s make their keep playing.  As long as the LO honors the lock commitment to the prospect at what ever cost to the LO (in the event they lose big and rates don’t match what they’ve told the prospect they have), I have no issues.   If the LO begins to squirm should rates rise when they really have no lock at the promised rate…it’s foul play. 

Borrower beware.  I hope I’m wrong. 

Yesterday’s prize piece of junk mail has to be one of the worst mortgage mailers I’ve seen in a while.   It states:

Dear M/M Porter,

Congratulations!  We have great news regarding your account originally funded with Mortgage Master Svc. Corp. …

Note:  Who ever shows as the lender on your Deed of Trust is public record.  It’s not magic that someone has this information.   This information is available for purchase from the credit bureaus, title companies or many other data resources.

We are happy to inform you that you have been preapproved for a new mortgage loan that can substantially lower your monthly payment…we can "freeze" your current interest rate and lock you into on of our "fixed" product lines.

We do not qualify for the Bush/Paulson "freeze" plan.   Nice play on trendy mortgage words.

The Federal Government has issued new incentives on 30 Year Fixed Rate Mortgage Loans through FHA & Fannie Mae!  These incentives have considerably lowered fixed rates and made refinancing attractive again!

We’re still waiting on Congress to work out mortgage plans.  Fannie & Freddie now have risk based (credit score sensitive) pricing for a-paper.   Rates are attractive right now due to investors seeking safety in mortgage backed securities (bonds) instead of stocks.

This promotion will expire January 28th 2008!  However, as an added incentive for you to call us right away, there is an immediate opportunity for you to "skip your next two mortgage payments"!!

Ya gotta love the two exclamation points.  The letter goes on how we must call right away and is signed "Have a blessed day!"

Under the signature, it states rates low as blah blah blah, which is an obvious option ARM and does not include any APR.   This is pure trash.   In the fine print below that the letter does state the letter "is not a direct solicitation endorsed or sponsored by Mortgage Master Srvc Corp".   Duh!

What now?  No where on this letter can I see who the lender is or if they are licensed do provide mortgages in Washington state.   Letters that are a solicitation for mortgage loans that are misleading such as this should be forwarded to DFI to investigate.

Here’s the address:

Enforcement Unit, Division of Consumer Service

DFI, P.O. Box 41200, Olympia, WA 98504.

Please don’t select your Mortgage Professional by a mailer such as this one or a phone call from a total stranger.   Get referrals from your friends, family, co-workers or professionals you trust and respect.   If you had a good experience with your previous Mortgage Professional, contact him or her if they are still in the biz.  If it looks too good to be true, it probably is!