Previously, I wrote about the state of the mortgage market, based on a direct mail marketing piece I received from Wachovia Bank.  I thought their letter, offering purchase loans to current customers not even in the market for a new home, was bad marketing at its best (or worst?) and a sad reflection on the state of the company.  This week, my nominee for "Stupid Mortgage Marketing Letter of the Week" is ING Direct, a direct lender and purveyor of the "Straightforward and Fair" Orange Mortgage.

Now as a bank, I like ING Direct.   Two kids and two houses ago (when I was able to actually save money) I had an internet account with them because they paid a lot more interest than my local bank (yeah, that's you Wachovia).  As a matter of fact, I think I still have about $40 in an account there somewhere, which when you take into account the higher than average interest rates they pay and the miracle of compound interest the account is now probably worth............. about $40.

ING wants to offer me a mortgage that "fits my needs and isn't filled with surprises".  A banner on the letter advertises a 5.50% rate, but surprise! - it's a five year adjustable rate mortgage (ARM).  Now I assume by now that the marketing geniuses at ING got the memo, read in the newspaper, or received on of my own "brilliant" direct mail pieces warning consumers that billions of dollars in ARM's were set to adjust and that they better refinance now into a low-fixed rate mortgage before their payments rise.  In fact, I'm sure they got that memo because not once do they use the terms "adjustable rate" or "ARM" in their letter but rather say (in what in my opinion is both deceptive and stupid) "The Orange Mortgage could save you thousands, because we base our low pricing on keeping the rate fixed for 5 years instead of 30 years, like most banks." 

Are you kidding me?  Is this direct lender now trying to market to consumers under the premise that ARM's are better than fixed rate mortgages because the rate doesn't stay the same for 30 whole years? Isn't everyone else in the industry busy trying to blame all the greedy mortgage brokers who stuck the poor consumers into ARM's (supposedly against their knowledge) causing them to lose their homes when the payments adjusted, leading to the current crisis the industry is now in?

And just when you think it couldn't get any worse check out some of the "Answers to Your Questions" on the back of the letter:

One is about how high the rate can adjust.  I'll skip over the details but leave you with the statement that you can expect this mortgage "never increasing more than 6% over the original rate for the life of the loan."  So the rate starts out at 5.5% and can increase as high as 11.5%, more than doubling the payment and this saves me money how?

Another question is:

Is there a penalty for cancelling my application after I apply?

Actually, that wouldn't be one of my questions because I would never assume there would be, but guess what the answer is?  "If your cancel your loan or your loan is withdrawn due to inactivity, we'll charge you $350 to cover our expenses.   We think that's fair."

Really ING?  I don't think it is fair, not at all.  You're a huge company and can certainly eat that $350 that you wish to pass off to the customer after he changes his mind, realizing that his mortgage is actually an ARM, and may not be so "straightforward and fair" after all.  I've known small mortgage brokers  who incurred all the expenses of processing a loan, even fronting the cost of the appraisal, only to have a customer decide she didn't want to refinance just before closing  because her "mom told her  not to".   I've also known Realtors who waste dozens of hours and gallons of gas taking prospective buyers to look at homes only to have them decide to continue to rent for awhile longer.  Nobody ever sends anyone a bill for their expenses.  Maybe your policy is fair ING... for you; it would put the rest of us out of business.

And topping off any crappy loan product, is the requisite one year prepayment penalty of 3% "to compensate for our expenses and lost income" in case you decide to pay your mortgage off (read sell or refinance) during the first year.  ING warns that if you don't plan to commit to this loan for more than one year "perhaps this isn't the right mortgage for you."  

Perhaps they are right about that one; this definitely is not the right mortgage for you.  And to think it is mortgage brokers who are blamed for being dishonest, deceptive, and greedy.

Michelle Chamberlain is a Pennsylvania mortgage professional who prides herself on being neither dishonest, deceptive, nor greedy.  To refinance your own adjustable rate mortgage, other "crappy loan product",  or to learn about other mortgage loans we offer visit www.aboveallmortgage.com , email, or call toll free (888) 891-7704.