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Realtors, do you do this? Consumers, just be careful sometimes..... Locking in mortgage rates -- Part 1 of 2

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Client's shopping for a mortgage who get to the loan officer first. They feel really comfortable with this particular loan officer and actually tell this loan officer that they trust them. Mr. Loan officer, thanks for educating us, says the client.

It's been a few days now and the loan officer has not heard from the buyers after leaving a message on their cell phones, at home, and both of their e-mails for 2 days straight. This couple prior to this was calling this loan officer every day for 1 1/2 weeks.

Yippie. I caught the buyer, Mrs. Client, at work. We had a good 30 minute discussion. I asked her, Theresa, didn't you trust me and like me? She said yes. But they were scared and confused, being the fact that they are first time homebuyers. Oh, by the way, the loan officer mentioned above was me.

But back to the client. The client had a concern about one of my fees and showed it to the realtor. FYI : I spoke to this realtor twice just to introduce myself. The client explains to me that the realtor, who is a dual agent, asked to see their good faith then. The realtor tells the clients that my commitment fee was too high. Ouch....

Well, there just so happens to be a loan officer in her office who she asks to sit down with these clients. The loan officer tells them that I am charging too much. He undercuts my costs that were shown on the good faith estimate and matches the rate. Folks, anyone that knows anything about a good faith estimate knows that there would only be two to three fees that would be actually charged from the lender. The rest of the fees are 3rd party fees and escrow charges. He even slashed these.

Back to speaking to the buyer at work. I asked her if this loan officer has called them in the last two days, since rates have come down. Client : No... Her name is Theresa. So, Theresa, has he ever explained to you about locking in or floating your rate? Me : That rates are extremely volatile now. Theresa says No. Please read this in regards to locking. About 3/4 of the way down. Mortgage Shopping -- The Educated or Uneducated Borrower

Then Theresa, please call the loan officer with these questions and please act like you are just inquiring because your dad told you rates came down. People, keep in mind that he matched my rate of 7% with zero points a week ago. A rate that I gave to these clients 2 weeks ago. My current rate, 6.5% with zero points.

Theresa comes back to me and tells me that he said rates haven't done much and don't worry about it. Then tells her that she isn't settling for 40 more days. That he will worry about rates next month, when they get closer to the closing date. Rut Row. RED FLAGS galore. I guess he thinks he has this one in the bag per se. First off, bad advice all around. 2nd, he is making a lot of money at this rate.

dog eat dog world Conclusion : As a realtor, how hard do you try to get a client to use your loan officer? And could it actually hurt your client if you push too much or don’t know anything about the deal and make the other lender look bad…..???

Don't get me wrong, I love realtors that refer me business. I know some realtors that give out 3 names. But that is just to protect themselves. In all honesty, do they have faith in all 3? Do they hope that the client chooses their favorite lender? Because business is scarce for so many, will loan officers get a tad desperate and twist things to make it sound like they are much better? It's a Dog Eat Dog atmosphere out there right now. Word of advice, don't leave someone that you actually trust and feel good about, just because someone else is making a promise that is better. If you are confused, do your research on the internet. That's what these clients did.

In part 2, locking in rates, I will give the ending and what to expect from your loan officer from day one, up until closing. This will be all about the rates, may it be floating or locking your rate until you close on your home. This will be a must read, especially in today's market.

PS... so, what do you think happens?

Realtors, do you do this? Consumers, just be careful sometimes... Locking in mortgage rates -- Part 1 of 2

Mortgage Rates -- Locking or Floating -- Part 2 of 2

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Posted by Jeff Belonger -- The FHA Expert.com -- FHA Loans -- FHA mortgages - USDA loans on 08/23/2007 11:00 PM

Comments (36)

realtor, loan officer, mortgage, financing, fha, bad credit, real estate, bad market, locking rates, floating rates, market

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36 Comments on Realtors, do you do this? Consumers, just be careful sometimes..... Locking in mortgage rates -- Part 1 of 2

AUG

2007

I stay out of trying to advise my clients about their financing. I highly recommend they speak to more than one mortgage broker, and compare apples to apples. And I have one MB who has consistently done a better job of explaining the fees than any other. The guy is so honest he'll tell them if another broker is offering them a better deal. So I do encourage them to talk to him, and I make sure they know that they will not be obligated to anyone, just by talking to them. I know people are desperate right now, but this guy, and his wife who is a Realtor, both operate the same way. They're honest to a fault!

I have a lender I like because she does a great job, and makes sure people know exactly what they are signing. I don't push hard at all for my lender. I ask clients if they need a referral and if they do great, if not that is okay too. People think kickbacks when you push too hard.

Having said that, as a listing agent I would never let a contract go in this market without requiring that the buyer lock in their loan program within 5 business days. Any listing agent that allows someone to NOT lock with programs disappearing by the day is not helping their sellers.

One thing I do know is that the few LO's I recommend had to earn my trust. I would not refer if it was any other way. I am now moving to add another to my list and he deserves it....Just got his cards today as a matter of fact.

In any case, if client's are working with someone I don't try to sway them to use another loan officer although I do recommend they inquire (without giving personal info or running their credit again) with other LO's and compare. Then go back to the one they are working with (if they are comfortable with that person) and ask to match it. It's only fair....this is a highly competitve market all around.

Ugh! I don't push but I do encourage them to be informed. Sorry this happened to you!

Nobody is taking a guess at the outcome? ;o(

Lisa..... hey, I don't mind when realtors ask questions, maybe wanting to look at the good faith. But I truly think they step in too much and sometimes confuse the matter. And some loan officers tend to explain differently or leave things out. Overall, especially if they were already comfortable, but now getting family pressure and realtor that introduces them to someone that compares his fees and makes them a tad cheaper.... but doesn't explain about the important issues.

In part 2, I'll talk about this rate being offered with less fees means squat, until it's locked in. There is so much more to look at. thanks for your feedback.

Melina..... that's great and I am jealous. And I agree, people think kickbacks when you push. It all comes down to the educating of the clients which is so lacking in this business now. Sounds like you have a winner of a loan officer. That's great.

But I disagree with your comment about not locking in within 5 business days. First off, this is not up to the listing agent, or any agent for this matter. Seriously, they should keep to selling houses. A fact? Lenders can pull loans anytime they want and not honor rates. It's a hard cold fact that has happened. Great example... AHM (American Home Mortgage) went bankrupt. Even if rates were locked in, they won't be honored. It's a lot more complex.

My meaning behind this post was the way the one loan officer handled this and told the clients don't worry about locking in. And this is after the market picked up in a positive note. We can't predict the future, but I can certainly educate my client and explain to them their options. This other person did not. Thanks for your input.

Sally.... I know this, because you have talked about this before. I had a great lunch with a new realtor today, just 1 year into the business. My biggest sell to her was communication and how I communicate to both the buyer and all realtors and lawyers involved. This impressed her. You need to be available and accountable.

Overall, recommending them to inquire is okay, but again, it sometimes can hurt. They might inquire with a true sales person that will sway them with words, but still leave so much out. What the realtor then would need to do is make sure that they speak to the one that they liked, last. Giving them final shot. Remember.. the market sometimes changes every day..... Just my opinion and thanks for your input...

Dawn.... well, read part two tomorrow..... it happens to the best of us. But it also depends on how one would go about it. ... more so, if they can get a 2nd chance in getting a hold of the borrowers.

AUG

2007

My guess is you wree able to explain in your very educating way how your program would actually benefit them and you got them locked in today! right?!?

To answer your question, and we've talked about this before. I do recommend three loan officers. I do make sure they are people I've either worked with before and have built a solid reationship with or one who is very knowledgable and with whom I hopw to refer soon.. ;) . Etiher way, I make sure the clients are comparing apples to apples and would NEVER refer our in-house lender "just because". That doesn't make sense.

Jeff - all I can say is that sometimes we are all undercut and made to look like something we are not.... and it is always the consumer that pays the price for the greed in our business... Sorry this happened - it is not right

I think I know how the above scenario is going to turn out, but I won't spoil the ending :-)

To answer your question: If my buyer clients come to me pre-approved I call and introduce myself to the lender prior to our home viewings if possible. Since 70% or so of my buyer clients are first time home buyers needing concessions I find this pre-purchase chat imperative. (What does the program allow? How much money will these clients need in reserve? Have they met those requirements? You get the picture) If there are no red "hey there look at this!" flags then I am happy. If the clients are happy (no confusion, no "I'm not sure about this") then that is a good sign for me also.

If my buyer clients show confusion about the mortgage process after it's been explained, if they are unsure if they are in the right program, or if the lender quotes concessions that I should seek on the buyers behalf that I know are out of the range of the norm then I will advise the buyers to get a 2nd and 3rd quote. I also tell them to make sure that apples are being compared to apples and not given incomplete good faith estimates.

Here's a recent good example: Mr. Buyer talked with his current lender/banker and received his pre-approval. (No underwriting yet, class A+ borrower however) When we were ready to write the offer on his new home he asked if I would look at the good faith estimate as he wasn't sure if he should pull some $$ out of a c.d. or not, or wait. I looked at it and made a note on a separate sheet of paper that the tax prorations to the seller weren't on there and showed him approximately what that extra cost would mean to his bottom line. The interest rate was the norm for that period, but there was no lock date. I brought that up to him also.

The next day Mr. Buyer called me and said "I think I want to shop around for another mortgage program, any references?" I gave him 2. Later that day he called me back and said "I'm switching. Lender #2 doesn't charge an origination fee, and can lock the rate and it's 1/4 less."

Of course I received a nice friendly call from the 1st guy the next morning. I told him that Mr. Buyer was savvy, asked for the references and perhaps he should have talked to Mr. Buyer about a rate lock.

Jeff,

I don't remember reading about locking in rates before, great idea! clearly this is a needed subject, I know about locks and floats, but does the consumer?

Great,

Tom Weiss

Jeff, there are offices that have "strategic partnerships" with certain lenders that rent space in their office. I don't use them in my office. I use my 4 and you are on my list. I am more comfortable giving out a list of 4. It was 3 until I met you.

I tell the buyers to call any of these for great customer service and rates. But, customer service is most important. I promise them they will get them closed on time and we will not be sitting at the table waiting on funding.

Still some people shop around and find some ya-hoo on the internet. So we just hold our breath, speak to the lender. But, they almost never are smooth.

Buying a house is the target but finding a good lender is just as important, no it is actually more important.

Per some comments. These clients found me on the internet....... Information about FHA loans (podcast)

Chrissy..... hhhmmmmmm come back later to part 2 for the that answer....

I do understand the apples to apples. But even comparing those apples can be tough. And I hate to say this, but no matter how much faith you have in someone, this can still be hard to accomplish. Should just come to true service and knowledge at times.

Thesa..... I appreciate that and it wasn't right, but my knowledge and quick thinking reversed everything. But again, you need to come back to part 2 for that. ;o) thanks for stopping by.

Kris..... spoil the ending. I was hoping some more people would tell me what happened. In regards to a client coming to you pre-approved and you call the lender, I get this a lot. I sometimes ask the client for their realtors number and call them first to introduce myself. They are usually shocked... ;o)

Here is part of my issue.... you even mentioned this yourself. If the clients still seemed confused. Well, this is what happened here and the realtor took it upon herself and got another lender involved. One of my points is that this can still complicate things. Everyone has a different way of explaining things or handling things. Even though you might have a few trusted loan officers, it's possible that they still don't know more than the person that these clients were talking to. And it's human nature on sales at times to try to get that client on their side. It just happens. But who ends up with the better deal?

I am not asking for a perfect place. I know it may seem so.... but people will add things or tweak things just to make it look like they are better once they are brought into the picture and still might not have this clients best interest. Especially if the market changed in the clients favor. If the first loan officer doesn't have a shot because of the change, again, who knows who has the better deal.

Thanks for your feedback.

Tom W. ...... you are correct. Nobody has written about this and I will have something on this by today or tonight. I have only seen one from Brian Brady, but it talked about locking in now. I am going to go more into detail on some key aspects of locking and floating that are not always talked about amongst loan officers.

Missy..... sure, there are many. And I actually know a few and they actually do a really good job. But this is because they are with big, ethical companies. But then you have the smaller lenders that are in some of these offices and they are not as competent at times or ever.

In regards to the internet, I am on the internet. I have 3 clients just in the last 2 weeks that are coming to me and I am doing their loans. Yes, they found me through my blogging. But I am still on the internet and 2 of them are out of state.

In any case, I know I am on your list and I truly appreciate that and the trust that you have in me. Thanks for your input.

Hi Jeff,
I have 3 that I refer my clients to these have earned my trust by their professional, competent service and availablity. I had to take one off recently because she was so slow returning calls.

I recently lost a deal to the 'realtors lender'.

Realtor claimed that my origination fee was unnecessary and that client should look into another quote with his buddy the lender.

The realtors friend cut my fees and matched the rate..... and DIDNT floet the rate down.

The buyer got a low fee high rate mortgage when the RIGHT loan for the client was a high fee low rate mortgage. But, hey, the realtor lender didnt care about what was best or the client.... they just cared about THEIR commission.

I educated the client later and they were steamed!!!

THINK THAT 'REALTOR' WILL EVER GET A REFERRAL FROM THIS CLIENT?

Absolutely not.... but hey, maybe he got a cut off the mortgage. LOL

you know you mispelled Dual Agent??

You spelled it Duel Agent... which is definitely ironic given the topic of your post

there is no reason that there should be a DUEL with agents but there are so many people that seem to disagree with this.

It is not up to Agents to set Mortgage Brokers fees any more than it is the Mortgage Broker's responsibility to tell the Buyer that they should negotiate another 2-3% off of a listing that they are buying without representation because the listing agent doesn't need 6%...

you see - it is all perception... and bank fees, rates, lender fees, points... Realtors that don't know the entire situation from the finances to the needs of the clients to the reason a loan is structured the way it is should not be interfering.

You've given 3 names, you've done your due diligence... if there is a HUGE issue, CALL THE LOAN ORIGINATOR, don't panic a buyer until you have to!

and my #1 favorite ALL TIME!!!

"My lender can beat that rate"

Uh, really? How did you take a full loan application and pull credit and verify income/asset docs in 1.1 seconds? YOU could be the best loan officer in the world. ;)

In one case my client's were already in contract and wanted to "shop around" .... because THEY felt the fees were way high. There was no time for shopping around! Within a day I just called a couple of lenders...gave them figures and they both had better. Called my clients and told them the info and to ask their LO if they could match it....otherwise they were going to drop that one! I believe if they are comfortable with someone to stick with them. In this case....they had an LO they were comfortable with until they started hearing different interest rates, closing costs and the whole bit. She matched it and they stuck with her. It actually turned out better because the buyer was ready to hold up the deal longer. She actually saved them money in the end too. (It was a bank) And I don't do dual agency. We are open to negotiation and whatever is set by our co.

Cynthia..... that's good that you have 3. I wouldn't mind being on 5 other reatlors list of 3. But in all honesty, do you have a favorite. One can't possibly love all 3 and think all 3 are the same and good? Just a question and not trying to imply anything. I love a good discussion...

In regards to the one loan officer being slow. Hey, maybe on 1 deal a year...things happen. But if we are talking that this is the norm, then I would have issues also.

Tom B. .... you are correct. Just because fees might be cheaper.... do they lock in? Does the lender come back a week later and now says, hey, rates went up... maybe rates didn't go up? Maybe this was a way to get the client in, but never discussed locking in their rate because of this.

And you are 110% correct. Once you educate the client, even afterward, will that realtor get referrals... probably not. Will you get some? probably yes.

David.... lol At least someone reads these... thanks, it's been changed. And yes, how ironic on the word, duel and dual. I will say this, I was tired when I wrote this last night, hence why it might be about 100 words to long. The official count... 750 words.

David.... you it the nail on the head. Giving 3 referrals, okay. Telling someone that their fees is high? hhhhhmmmm It can backfire in so many ways. Yes, they don't know the actual deal. Will every client ever get the best deal? As long as it is fair, but service and accountability is the best.... then stop breaking stones.

Overall, if a realtor sees fees all over the place, then that is something else. But there were two fees on there with a commitment fee of $695. A tax service fee of $79. That's it.... please read part 2 tonight for the ending story, it gets better. And thanks for your feedback, it was right on.

Tom B. .... is this topic getting under your skin? ;o) This use to be my worst frustration in the mortgage industry. But I am armed with so much knowledge and tact, that I now even get half these clients back, if they wonder off because of false hope from the other loan officer. As long as they allow me to talk to them one more time, after the fact, but before settlement, I am changing minds.

And it goes back to what Sally says below... that is great that she makes the client aware to give that first lender a chance, because things do change, the market does change.

Sally.... You sound like an awesome realtor. Not only do you have your team of loan officers, but you don't seem to tune out the other lender, if they can come back down to earth on their fees and rates. This is good sometimes, but it could be bad. My phrase has been that there is usually no negotiating in mortgages. If they charged high the first time, they were trying to make more money. But... it depends on the whole scenario. So we can't always pass judgment on this issue. Especially if the client was already comfortable with this lender.... thanks for sharing this.

They called ME with concerns. I don't butt in unless they are the ones getting skittish and wanting to change the whole scenario around. I do not leave my client's out in the cold if they are asking for my help and wanting to go searching when we had a thirty day closing! They chalked it up to the LO "changing" over the last year because it was getting slow (yes,...one year we'd been working with them) and her fees "changing drastically"...how can helping my client in this situation be a bad thing??

Jeff, I'll take a shot at the ending of this scenario.

The buyers 1 or 2 days before closing find out that the terms and / or costs of the mortgage are much higher than what you originally quoted them. Of course they are NOT pleased and either a: Go ahead with the closing on their home and call you afterwards to re-fi and fix things or b: They've called you with little or no time to spare to ask you to please rush things and do the loan for them after all.

In regards to one of the points you made to me above: If a buyer client is confused I first ask them to clarify things with their lender and in fact call the lender myself to say "Hey, they need some help here. Do you mind going over things with them again?" Most of the time the lender is wonderful and doesn't mind taking time to educate the buyer. Only if the buyer client feels that they aren't either getting a straight answer or are being talked "in circles" do I recommend a 2nd and 3rd opinion/quote.

I recently had a similar situation where MY client was asked to speak to the Realtors lender because they could possibly be more aggressive. Well the other lender without pulling credit suggested a program no longer available. MY client told me this information, I informed him it was no longer available. Would you know it 2 days later the other lender came up with the same program I originally offered with a rate 3/8 higher. The Realtor was not happy when MY client went with who he knows and trusts, for less fees and rate... VERY FRUSTRATING!

AUG

2007

Hi Jeff,
Of course I have a favorite, but I try hard to make sure clients do not know that. By the way--I might have something I want you to look at in Virginia, is that a possibility? It probably will be down the road a little.

Yer awesome Jeff, just like Jason Price.......

Professionals like you guys deserve the business you get!!

=-)

Sally..... I have no problem with you jumping in when this happens. It's when those that jump in right from the get go, not knowing the whole scenario or the ins and outs. But if someone is changing something during the process, then by all means, jump in.

Kris..... as you already know, you guessed wrong. But you took a stab and that's all that I was looking for. But as I stated before, this also happens often. And it's because the client won't call me back to go over the new offer that they received. Just allow a loan officer to go over it. You might be surprised and you might become more educated at times. Which gives you better bargaining power.

In regards to asking the lender to clarify some things for both you and your client, if either one of you is confused, generally that loan officer should be very helpful in explaining this. If they sound standoffish, it might because they are hiding something. Just my opinion.

Kim.... that's the worst, suggesting a program that is not even there? Sounds like a bait and switch to me. What kills me is that the realtor was upset because this borrower went with someone who had a cheaper rate and fees. I wonder what was in it for the realtor? Intriguing minds want to know.

Cynthia..... well, it's okay to maybe say, this is a favorite of mine, but you pick and choose. Maybe they will find you a new favorite. :o) In any case, I sent you an e-mail about possibly helping you in Virginia. I think I said North Carolina in my e-mail.... lol But I can still help in Virginia.

Alex...... thank you very much for that polite comparison and compliment.

You are very welcome Jeff...

From what I have heard about you from other members in Active Rain -- You deserve it!!

=-)

Jeff - Funny you should say that, MY client asked me the exact same thing....what could be in it for the Realtor? I told him that I hoped nothing. This is also a client I have had for at least 8 years. Bought 2 houses already with me and refi'd several times!

It is one thing to see a bad gfe and suggest a second opinion.

It is another thing to 'steer' a client to the preferred lender when you have zero clue about the clients deal.

Alex.... well, thank you very much and for the support. Hey, I do loans in Florida also. I know you know this. thanks

Kim.... then after all of this time, they should be telling anyone else... NO THANKS... I have my preferred lender. I have had some clients say this and some people still push them to talk to someone else. That part irks me and we could be here forever on that topic.

Tom B. ...... I agree on both statements. Just as David below you expressed, not telling his clients to show the other GFE to the next lender in line. I disagree with this. Because we can see if they are bad. And I will admit if everything else looks in line.

David..... I semi disagree about letting other lenders see each others good faith estimate. Sure, another lender saw mine and chopped his fees. But if I didn't get to see his after the fact, I wouldn't have been able to point out to the client that this loan officer also chopped the escrows and the title fees. So, I can use this to my benefit at times. I have nothing to hide. Besides, the market can change daily. What you get today, could be different tomorrow and make the previous one look higher. I see this often. So, I ask all my clients for a copy of the other lenders GFE. Thanks for the compliment and for your feedback.

PS... David, if the client doesn't show any lender another GFE from someone else, then who is the one that could advise them that the one they choose is the best? The best because the fees were the best? Maybe not, because there aren't that many lender fees. And some clients look at the bottom number, which is not always good... think about this then...

I can GUARANTEE you that if I suggested that a realtors fee was too high and the client should get another realtor.... they would pitch a fit.

LOL

Tom... now, down boy.... ;o) keep in mind, not all realtors do this. And if they do, they should tread lightly. I agree on your statement. This could be a battle, but I hardly ever see realtors drop their commissions. But again, I don't know what they always do on their end to make something work... or their effort, etc etc... so I just leave it alone. The buyer can negotiate this if they want.

Jeff......

I could take you up on that....BUT I am getting licensed through Knightlines Mortgage...... I think that would turn out to be a conflict of interest....I could use you as "one of my 3" to give as a choice for clients...how does THAT sound??

And I would NOT be steering people at the same time!!

hehehehehe

=-D

Heh....

No worries, Jeff. I am not advocating that lenders steer clients away from realtors. I mean, why would I?

I don't know anything about their relationship, or how good/bad they are. I don't know what they are doing (or not doing) to earn their commission. I do not know how hard they are working for their client. I do not know that their commission is fair or not.

Ahem... you know.... like why would ANYONE claim to know that a client could get a better deal from a service providor..... know what I mean?

AUG

2007

Hi Jeff

"The realtor tells the clients that my commitment fee was too high."

What is a commitment fee and how much was it?

Love the monkeys Jeff! Very solid post and looks like you have stirred up a hornets nest regarding appropriate fees and steering of customers. This is a topic I would love getting a group of Realtors and LO's together to discuss of over few beers...bet it could last for hours.

Tony, you buying? I'll bring the donuts

AUG

2007

Alex.... that is totally up to you. I always appreciate new business and would hope that you would know that I would take good care of them. Thanks for stopping back.

David...... again, no problem with you looking over the good faith estimates. And I am sure that you would point something out if it stood out or didn't look right.

On another note, what is this lender doing that others can't? I would love to know the details. Keep me posted and let us know when it closes. thanks

Tom B. ...... I totally know what you mean. Thanks for following up.

Jim..... A commitment fee described in the HUD books and throughout other lending institutions is that of a pledge by the lender to make mortgage funds available to a buyer for buying or refinancing a home. This agreement is conditioned on the buyer having provided accurate information and satisfying all conditions and requirements.

In reality, a commitment fee from us is part of our warehouse cost and internal costs. We are a banker. This other guy is a broker and it's actually just another junk fee in his case. But also in reality, it might not be because the lender that they are selling to usually has a fee also.

My fee was $695 and his was $495 and he shaved off some escrow charges. But his rate was a 1/2 % higher.

Tony..... I agree, this could be a conversation of hours.... and maybe into the morning if it was over beers. ;o) And yes, I love the monkey pic also. thanks

Tom B. ..... you'll have to bring more than that.... lol

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