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I Apologize

Yesterday, in the course of accepting a loan application for a new client and their possible refinance I ran into something I had never personally seen before.

In a phone conversation setting up an initial consultation appointment I had started to discus with this new client the various loan options he might have when refinancing. It quickly became very apparent to me how little he knew.

This client had purchased a house 2 years ago. It was their first house and they had saved up enough money for a decent down payment. They had good incomes, great credit, they were ready. They found a nice 3 Bedroom / 2 Bath in nearby Fremont, CA. For this transaction they were lucky enough to use just one person, a friendly real estate agent who also could help them with their mortgage. That was 2 years ago. Now he won't return their calls. I had the client bring in all their original paperwork, I made some calls, and did some digging.

To make a long story short, this "real estate professional" was a real pro.

He listed the house (3% Commission).
He represented my client in the purchase of this same house (3%).
He represented the sellers of this house in the purchase of their new house (3%)

I checked on his license and he is a Broker. There are some issues that need to be covered when an agent "doubles" on a transaction. I stopped there because of what I found next.

This Broker also was the loan officer. In talking to the clients they have indicated they want to live in this home for the rest of their lives. I can only imagine they had that same feeling a couple of years ago and related this to their loan officer / real estate agent.

In reviewing the HUD-1, I could see clearly what he had done. He sold them a Payment Option ARM. He didn't just sell them, he took as full advantage of them.

He charged 2 points origination on a 95% LTV POA.
He set them up with a 3 year HARD Prepayment Penalty.
He received 3 points in Yield Spread Premium for that Prepay.

In layman's terms he screwed them. On this one transaction alone he netted $30,000 from the sale of the property. Then instead of securing a loan that fit their needs, he gobbled up as much as he could of their down payment, applying it to charging them points and giving them a loan that paid him the highest YSP possible. His net for the loan? $23,750. Bringing his payday up to a cool $53,750.

I have no problem with professionals earning what they do. I do have a problem with this one in that everything he did was to benefit ONLY himself. If he had done the proper loan for these people they would have gone in with a hefty down, they would have a 30 year fixed (which is what they thought they were getting), and they wouldn't be upside down in a transaction right now, unable to refinance out of one of the worst situations I have ever seen.

On behalf of my chosen profession,

I apologize.

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Posted by Mike Mueller on 08/21/2007 09:35 AM

Comments (34)

choosing the right mortgage, home loans, loan officer

Originally posted at: Mike Mueller, Social Media.ist: I Apologize

This post has been included in California Information Contra Costa County, CA Information

34 Comments on I Apologize

AUG

2007

What a scenario! I have heard of such but never witnessed anything like that. Unfortunately, there are those types out there. Doing the right thing for all involved is the best policy. Thanks for the post.

I feel for your client. They did so much right. They came into the deal financially prepared and used a professional. Unfortunately, their fatal mistake was trusting that professional.

These kind of "professionals" are what give us a bad name in the industry. As a professional. you should always have the customer or clients best interest in hand. We have som eof the same problems in CT.

Yet another example of why Mortgage people should be licensed, and also why Mortgage people should not also be Realtors.

James Boyer

Realtor Associate

Keller Williams Real Estate

Summit, NJ 07901

Mike,

This is a great post, and you will receive a lot of traffic on this.

Our State in Arizona is finally looking into making Loan Officers licensed. I think part of the bill is NOT to allow a Realtor hold a Real Estate License and a Origination License. I do not agree with licensing, but if our industry will not control these predators, then someone has to.

These people got ripped off by a Guy who is probably not in business anymore, and like you said if he would of done a need analysis, the least he could of done is put them into the right loan program up front.

We should create a website and post all these peoples names and what they have done to hurt our industry. This guy made it possible to make Realtors and Loan Orginators look bad and he will not be around to deal with the clean up later.

Happily, in Washington State, Realtors(r) cannot be Mortgage Brokers. You know the CA law and ethics - if he's outside either you know what to do next.

No need to apologize. Just out this person for who he is and report him. They are the ones giving the business a bad name and have no right to be licensed.

Wow, that sucks! What I don't get from the comments is why it's unacceptable to have both licenses? I do both real estate and mortgages and have for years with very few complaints. This guy was a shark and I really don't know if there is a way of avoiding these types of people, licensed or not.

Bob Mitchell

ValueList Real Estate Services, Inc.

It is sad!

These buyers/borrowers, no doubt put 100% trust in this alleged "professional" ~ There are so many "pro's" out there that do the very same thing!

Rob, Rape and Bamboozle every single client that they can. Obviously, there is such a dire need for strict ethical training and weeding out these type of "pro's".

What you uncovered in this one transaction is probably just the tip of the iceberg! SAD, SAD, SAD!

WOW one deal and take the rest of the year off or at least most of it, you would think he would return their calls

Gary - thanks for the visit and the comment. Same for me, I have never seen the physical evidence. The HUD -1 doesn't lie.

Rosario - That's the sad part for me is that he violated their trust.

Michael - You know it.

James - I couldn't agree more.

Gary - I checked and he is still in business.

Alan & Adam - Will do. Thanks for the visit.

Bob - I think most of of the people I know will argue with you the old "Jack of all trades, Master of none" statement. I am one of them. I would venture to say that there is no way an agent could know as much as I do about loans, and I know there is no way I could know as much as the full time professional agent knows about real estate. I believe attempting to do both is a disservice to the client. This post wasn't pointed directly at that argument, it was more about the agent/LO taking as much advantage as possible of a client. That's just wrong.

Mott - It probably was (just the tip) I can't help to think he went on to finance the seller of the house in their transaction too.

Joe - He hasn't returned my calls either.

That makes me sick- it makes everyone in our industry look bad. Realtors and loan officers should never, ever be the same in my opinion.

Ginger - I agree. I did have a potential client who sent me a GFE once. Their agent was also their loan officer. I will say, looking at the GFE and if nothing changed, they were getting a good deal. I even told them that. However, I am still of the opinion that they cannot possibly know as much as two separate individuals.

In this area, I've never seen an agent acting as a loan officer and agent on the same transaction, and many area brokers won't let the same agent represent the buyer and the seller in the same transaction under any conditions.

In Washington, with so many lawyers in our population, the sellers would probably sue or at least file some sort of a formal complaint with the local agencies that regulate this clown.

Mike,

Thanks for writing this one, people will understand when they see this in layman's terms, these kind of dealings will be a thing of the past, when it catches up to them...

Great post!!

Tom Weiss

Patricia - Perhaps it's against the rules. I know it's permitted in CA

Tom - Thanks. I can hope the next consumer understands a little more. Maybe they'll all be wiser down the road. But I have little or no faith that this bad guy isn't going to see anything catching up to him.

(Of course I'd run him down Mad Max Style on my bike if I had my druthers.)

Mike, I would be afraid to make you angry.. :0) With your bike and all

Mike - I think this kind of thing probably happens more than we think. Most people really don't know much about the mortgage or real estate industries and misplacing your trust can be costly. Lucky the clients found you and I'm sure you know a realtor or two to refer them to next time.

Mike, Good post. Unfortunately, this is not that unusual. I know a lot of people, including myself that live by the rule "that you are trustworthy until you prove me otherwise". Unfortunately, this life rule has to go out the window when you are talking about money. It's sad but true. Perhaps, it gives you more insight into why I started my business. When I was working on the retail side I saw this on a DAILY basis. -Meg

Mike - I know a lot of people think mortgage licensing is the answer, however if this transaction took place in California, they already have tough licensing laws. I'm not saying I'm against mortgage licensing, however the solution goes much deeper than that.

While that scenario doesn't happen all the time, it does happen enough that it is alarming. I'm with you regarding it being a scummy business practice that tarnishes the image of both the real estate and mortgage industry. Thanks for sharing.

Mike, that is just amazing. I can not believe that this is legal. I have had several people hit me up trying to get me to do the whole loan officer/realtor deal before. I don't think so. I told them a few not so nice words about what I thought about it too. Well, I don't know what to say...that's just sad.

I hate guys like this.. they are just so sleazy.... I have said it before and I will say it again... never get involved in anything that smacks of conflict of interest.. personally I think this guy should lose his license.. or at least face a long suspension.

Mike - WOW! And I thought I was screwed before I got into the business. This is so sad, but I know it happens!

AUG

2007

Oh, I'm so sad for your clients. It only takes one bad applel to ruin the bunch - I'd love to give that "professional" a piece of my mind!

What comes around goes around and the "professional will get his in the end. Why can't Realtors sell/buy homes and loan officers arrange financing? It is just my opinion, but I do not think you should be able to do both on the same transaction, it seems like a big conflict of interest to me.

I have a friend who just lost her home, similar situation with a brokerage in Concord, he even helped them fill out the application for their stated, no doc loan and got it approved at 9% interest. Yes, they had some responsibility for what was in that app, but they really thought this is what they need to put in order to get their loan cuz their agent/loan guy/friend said so. Very sad.

AUG

2007

Mike... I am still explaining this to clients ...... it's ashame that loan officers like this can earn the trust of a client just because they say it's great. I hate to see people lose their jobs, but I am enjoying this market, hoping to weed many of these types of people out. The problem with this guy is that all he needed to do was 3 of these same loans in one year and he could last a whole extra year in this business, still destroying lives. SAD....

Tom - of course I was just kidding. After seeing the damage of glancing off a deer did, I'll let my friends do it instead. ; )

Maureen - I know it happens much more than we know. I see and hear it all the time. Sometimes it just a LO doing a Refi , that's bad enough. In this case it was the Agent / LO. Hey, do you think they got a Real appraisal? How about the home inspection? Was there anyone doing the right thing in this transaction? I'd hate to be the escrow officer. What would you say? How would you keep your mouth shut? As for finding me, it's too late. I can't refinance them out of what they thought was a fixed loan (it's a Neg Am). I will be sending them along to an Agent to help them sell their home, the home they wanted to live in forever. There's very little left for them to lose at this point.

Meg - Your company deserves as much discussion as it can get. Not just from me. I'll get back there.

Tony - I only know the licensing laws in CA. If we are tough I'd hate to see what other states allow. That's a scary thought.

Stephanie - even if they swayed you into doing both I would beleive you would try to do the best you could for the client, not like this guy did. Even so, I'm in your camp. Jack of all trades...

Kaye - or be run down on a long empty highway by an outlaw motorcycle gang?

Kim - It is very sad.

Chrissy - Not just one in this barrel. We have plenty.

Joe - I'm sad to say the professional will probably go along as if nothing ever happened.

Catherine! - Welcome back! It is so very sad. 9%? WOW!

Jeff - Here's the weird part. When the POA started going out of control the first person they called was this guy! Over and over again. The only way they found me was because he wouldn't return their calls. They would have gone right back to him! In fact they still don't get how much he screwed them. I do. You do. They somewhat do.

AUG

2007

That is just awful.

SEP

2007

Mike - This is a prime example of someone who is giving all of us a bad name. I hate the fact that there are people like this in our industry. It sounds like he is ripe for a lawsuit, since he was handling all of their business and gave them a royal screw job.

Chris - it is. Thanks for the comment.

Jason - Prime is right. This is the poster child real estate slime!

Mike - As a broker, I get questions about good faith estimates and HUDs all the time. Recently, I saw a loan that one of our clients closed on, and it appears the mortgage broker made about 5-6% on them. There were TONS of junk fees. Ridiculous!

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