This is a topic that might infuriate some of you who are in the real estate industry. If you are a mortgage lender or loan officer with integrity, then you should not be offended -- nor is this directed at you. There are just as many real estate agents who have no integrity too. With that said, I wanted to question whether a loan officer has specific duties to protect a client (borrower)? Is there no formal relationship established with the buyer to look out for them? It seems that loan officers and lenders can charge whatever they can get the buyers to pay and place them in loans that benefit the lenders, not necessarily the buyers.

As a buyer's agent focused on new homes, I was recently caught up in a tangle with a loan officer regarding the interest rate being charged to my client for a VA loan. To my knowledge, the borrower did not have bad credit; thus, there was no need to charge a higher interest rate. This lender was a preferred lender for a particular builder, so this could have given them a sense of exclusivity. The loan officer was charging $1,750 toward discount points to give the buyer a rate that was being offered with no discount points by other local lenders. I confronted the loan officer on the issue and she was obviously evasive. This lender was free to charge whatever they wanted, and the buyer is free to go elsewhere too. And by the way, the borrower had never locked in, so that isn't a valid argument. The loan officer simply told me, in not so many words, that the rate is what it is -- and that's that. As a result, I was going to inquire on the buyer's behalf with another preferred lender about changing over. Once this came out, I was contacted by the supervisor of the original loan officer's company; we were all put on a three-way call conference. I simply explained to this person, and the loan officer, about the need to seek alternative measures because of a sense of manipulation. There was still a lot of evasiveness. However, at the end of the conversation, a resolution came about; the discount points were waived and the buyer was given an interest rate at par with the other lenders. This was less stressful, forasmuch as all of the buyer's documentation had already been submitted; this can be quite cumbersome. Therefore, the buyer was pleased with the outcome.

As a new homes buyer's agent (click to learn more), my number one concern is the well being of my buyer; this includes the negotiation of the terms with the builder, onsite agents, their preferred lenders and attorneys. Learn more about potential oversight on the closing statement. An unsuspecting buyer can get caught in cronyism through these preferred relationships. It is my job, as an independent advocate, to promote the buyer's interests. I'll go to bat for them.

Any thoughts? Are unsuspecting buyers without a good buyer broker (agent) at the mercy of loan officers who are out to make as much as they can? What duties do lenders have to their buyers (borrowers)? What industry standards are imposed upon loan officers?

Update 8/29/2008:

One of my buyers was seeking to obtain a loan through a builder’s preferred lender. I suggested that the buyer get a second opinion from another lender to keep everyone honest (after being in the business for awhile, I have learned to strive to hold everybody accountable). The second lender offered a loan with a .25% (¼) lower interest rate than the first lender. The first lender agreed to offer the same rate, but charged a $760 loan discount point without explaining that to the buyer. I caught it when a GFE (good faith estimate) was provided to the buyer by the lender. The buyer agreed to the discount point because this particular lender was more lenient with the buyer’s current employment. Fast forward 3 weeks. A few days before closing, I encouraged the closing attorney to prepare the closing statement (HUD-1) so I could examine its accuracy. Guess what? That loan discount point was now $1,520, which was twice as much as originally quoted. We confronted the loan officer and it was dropped back down to $760.

With the mortgage fiasco that has unfolded recently, we have to learn not to simply trust just anyone -- even so-called professionals; these people include real estate agents, home builders, appraisers, closing attorneys, loan officers, real estate investors and lenders alike. It takes an experienced eye to pinpoint these nuances within a real estate transaction that might be harmful to a home buyer -- and could possibly be deemed fraud.