When Is It Time To Tell A Borrower To Apply With Another Lender?

Mortgage and Lending with Karen Cooper | Sr Retail Loan Originator ! NMLS # 223305 | 360 Mortgage Group LLC Austin Texas NMLS 223305

I've been in the mortgage/real estate business since 1983, with most of the past 15 years working with repeat and referral clients. Our relationships have a great deal of trust, which I believe to be important - especially in the current real estate/ mortgage environment. But, when is it time to tell a borrower to apply with another lender?

I wandered in to the world of Internet marketing, and realized that this same loyalty and trust bond does not exist, so made the decision to only agree to work with clients I am able to meet with in person when they are not an existing client or a referral from one. I focus on providing quality service over quantity, and am not interested in the "throw it up and see what sticks" business model nor am I interested in "playing the numbers game". I realize there is a certain percentage of fallout in this business, but my percentage has always been very small.

Shopper crossing sign by turtlemom4bacon photo courtesy of flickr.comLast week, I received a referral of a new client. This client has been actively shopping many different sources, from the Internet to their existing lender to other lender types they feel comfortable dealing with in this day when so many banks are performing poorly. We've already spent close to 4 hours on the phone discussing market triggers and sources of information/ data they may watch to satisfy their thirst to find the ultimate interest rate, and I believe we have established the beginning level of trust I feel necessary to decide to work together. So, I take the application over the phone, and these shoppers are convinced the interest rates will improve the following day when they are prepared to make the appointment to bring me the necessary paperwork, review and sign their application package and lock in their interest rate. But, the next day the market performs poorly, and interest rates move up.

The borrowers make their round of phone calls and discover their prediction did not happen. Although they know there is enough benefit to go ahead and proceed with their refinance, that they can meet their objectives to consolidate and cash out while paying less than they do presently, they want to KNOW they are getting the lowest possible rate. They want to be SURE they have timed the market and caught it at its lowest possible point. We've had the conversation about the only way to know for sure what will happen is through hindsight, but they STILL want to KNOW. We've had the conversation that only God knows. If I knew it would be highly unlikely I'd still be a mortgage consultant, as I would very likely be day-trading from various exotic locations around this earth.

In to our story comes the loan officer from a different organization, who quotes the borrowers the rate they want. They DO tell them they cannot lock the rate in until they have a complete package including the appraisal, so I ask the clients "what does this rate quote mean if it cannot be locked?", and we talk about how they will have paid their appraisal and credit report fees to find out what terms they can really get. So after establishing a rapport and comfort level (I think), the clients call the day after they complete their application with me, after they've made their round of calls to learn the interest rates moved upward again, and one of the loan officers tells them they can still get the same rate they quoted the day before, which was lower than every other lender they received a quote from, with the same fees - AFTER all the other lenders opened higher and had multiple mid-day increases!!!!

While I'm in between appointments, on hold while returning messages that came in during my appointment, I shoot an e-mail off to these folks suggesting they go ahead and apply with that loan officer who is quoting them the rate they want. I'll hold on to their information in the event something goes awry with that transaction, and the worst case is they will have lost their credit and appraisal fees paid for that lender's transaction. I cannot afford to invest 4 more hours reiterating the same issues without a committed borrower. The time has come for them to go ahead and find out for themselves, and I can rest easy knowing I've done all I can do.

Do you believe it was time for me to recommend they go ahead and apply with the other lender?

Quality...not quantity!!!!!

See out there!

Karen Cooper - OR/CA Mortgage Consultant - www.Quality4Loans.com

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Karen Cooper Southern Oregon|California Mortgage ConsultantKaren Cooper - Home Lending Advisor Nationwide

               NMLS #223305



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Gene Riemenschneider
Home Point Real Estate - Brentwood, CA
Turning Houses into Homes

In Real Estate we deal with this all the time.  People are so intent on getting the best deal they do not get any deal at all.

Jul 25, 2009 05:59 AM #39
Mark Warner
RealEspace - Plano, TX


There comes a time when you have to say goodbye to a potential client and spend your valuable time with those who will listen to your expert advice. Even if you had closed the loan with them, it sounds as though they had unlimited time for you to educate them over and over again. You would have ended up making less than minimum wage. No one wants to expend their expertise on less than what they are worth.

I know clients appreciate when you give them information without obligation and you are educating them to make the appropriate decisions, but there comes a point where they need to learn by sad experience.

Jul 25, 2009 06:44 AM #40
John Fortener
John Fortener-Cert. Mortgage Advisor- GA Residential Mtg. Licensee - Fayetteville, GA
Powered by Success Mortgage Partners NMLS#130562


I like your comments. I say almost the same thing. Basically, it boils down to trust and who they feel comforable with. I have found that when you push them away, they tend to to come back. It's Human nature.

Karen, good post on a topic that has always bothered me. Where is that point of diminishing return?

Jul 25, 2009 07:36 AM #41
Renée Donohue~Home Photography
Savvy Home Pix - Allegan, MI
Western Michigan Real Estate Photographer

I believe in quality over quantity too.  People get crazy when I decide not to work with them because they are being unreasonable.  Explain to them what is going on and let them go.  They will think about you being so diligent on the front end when they get screwed on the back end :)

Jul 25, 2009 12:44 PM #42
Bob Bloom
Keller Williams Realty - Vancouver, WA

When the market is great, it is easier to dump a time waster. Sometimes when things slow down we wait toooo long.

Jul 25, 2009 05:56 PM #43
Larry H Morris
Evergreen Home Loans - West Linn, OR
Larry Morris, NMLS 150073

Karen - Good post. I've seen a shift lately in online use as social media has made the Internet more acceptable. More people are feeling comfortable with shopping online, both for information and products. Everyone feels that they can become an expert on just about any topic after several clicks of their mouse. What is not understood is how rates are calculated and how many diverse actions can influence whether rates go up or down. If the experts can only make educated guesses, how can a neophyte expect to time the market exactly?

I'm still sitting on 3-4 loans waiting for 4.5% because they wouldn't give me the go ahead at 4.625%. Several are still holding out as they have ARM's that won't adjust for awhile and one has given permission for anything below 5%. But it's frustrating all the same. Luckily, I have systems in place to keep them educated, without taking up too much time.

I was faced with a similar Internet client decision last week. I told the truth about her situation and it wasn't what she wanted to hear. Someone else told her what she wanted to hear (No problem, we can do it) and she decided to do business with them. I let her know that I would be here to pick up the pieces if she needed me to.

You made the right decision.

Jul 25, 2009 07:54 PM #44
Lyn Sims
RE/MAX Suburban - Schaumburg, IL
Schaumburg IL Real Estate

Yep, obviously they know more than you do, a professional of many years. Only Johnny Carson as the great Karnak can tell the market rates day by day behind that card!  So, with that said, you can only suggest what might happen and they can only listen. I think listening is not their strongest suite as borrowers. They HAVE TO know, which you can't. You know what's sad, you know they are going to get screwed out of their money elsewhere and there's nothing you can do.

Jul 26, 2009 11:40 AM #45
Karen Cooper
Karen Cooper | Sr Retail Loan Originator ! NMLS # 223305 | 360 Mortgage Group LLC Austin Texas - Leander, TX
Helping Homeowners w/Home Loans in 27 US States

Karen – Now if only all lenders would calculate the a.p.r. the same way, we’d be all set! We point our first time home buyers who take the ABCs of Homebuying course at our local college to look at the a.p.r., too, since it can be a guide for them.

Michael – Our market here in Southern Oregon is pretty active, too. Those buyers who think they are in a buyer’s market so they can low ball are ending up disappointed when the home they want is priced well because someone else swoops in and gets it.

Russell – Like Realtors, not all lenders are alike, eh?

Tchaka – I’ve worked with market timers before, but they’re usually stock market players. Not these folks! Black jack can be a fun game, as long as we’re playing with money we can afford to lose.

Brad – Yep, these folks want to refinance to lower expenses/payments. What I ran in to was an irrational focus on an interest rate/price that was no longer available when the market moved. The borrower acknowledged they were hearing the pricing had increased from every lender except one. When they asked if I could match that pricing, I told them it isn’t available and they should apply with the lender who says they can give it to them. I KNOW it isn’t available – the borrowers will have to find out for themselves.

Jul 26, 2009 12:38 PM #46
Karen Cooper
Karen Cooper | Sr Retail Loan Originator ! NMLS # 223305 | 360 Mortgage Group LLC Austin Texas - Leander, TX
Helping Homeowners w/Home Loans in 27 US States

Bill – Thank you!

Sally – I’m pretty patient, but finally reached the point where I questioned the likelihood of this transaction successfully closing. As much as I love this business, I DO also need to make a living.

Brad – I, too, come across a.p.r. discrepancies a lot when reviewing various TILs. And you’re right – nothing wrong with paying points under the right circumstances to get a lower interest rate, which does indeed raise the a.p.r.

Gene – The old when is it good enough, eh?

Mark – That school of hard knocks is where I’ve learned a lesson or two, also.  Always want to help someone else not have to go there. But, that school is where this lesson may – or may not – be learned.


Jul 26, 2009 01:27 PM #47
Karen Cooper
Karen Cooper | Sr Retail Loan Originator ! NMLS # 223305 | 360 Mortgage Group LLC Austin Texas - Leander, TX
Helping Homeowners w/Home Loans in 27 US States


John – The old boomerang client, huh? I think that point is a moving target sometimes.

Renee – Makes a challenging business go a bit easier when we eliminate unnecessary challenge don’t you think?

Bob – These borrowers came through from a referral partner. I will go above and beyond for a referral partner’s clients. The funny thing is it turns out that referral partner had these borrowers call them from a news article – they had never worked with them before!  Learning that piece of news made the cutting loose process much easier.

Larry – I’ve found most of my “low rate refi” fence sitters have already jumped. The ones that didn’t may be missing the boat with values being less than stable in most of their markets. Seems every time we see an uptick in the rates they never come back to the low point when they swing downward again… and every appraisal has low priced foreclosed comps!

Lyn – I believe you are right, and that is indeed sad.

My thanks go out to all of you for your great input, suggestions and support.


Jul 26, 2009 01:40 PM #48
Lora "Leah" Stern 914-772-4528
Coldwell Banker, 170 N Main Street, New City NY 10956 - New City, NY
Real Estate Salesperson

You did good Karen.  There are always those out there that will nickel and dime you to death and are just not worth your time and effort.  I think you did a superb job of politely informing them and letting them go.

Jul 26, 2009 02:51 PM #49
Karen Cooper
Karen Cooper | Sr Retail Loan Originator ! NMLS # 223305 | 360 Mortgage Group LLC Austin Texas - Leander, TX
Helping Homeowners w/Home Loans in 27 US States

Thanks, Leah. I know in my gut you are right.

Jul 26, 2009 03:04 PM #50
Joseph "Cathan" Potter
Coldwell Banker - Sebastopol, CA

Sorry to here this.  I think you've done all you can.

The client's focus is definitely in the wrong place;  They should be focusing on the house (or reducing their payments through refinance), not the very minor detail of the absolute lowest rate (I would hope the difference of an 1/8 or 2 of a percent isn't going to brake them).  Boy, are they going to be mad when rates go back up and they miss out.

Jul 26, 2009 05:18 PM #51
Karen Cooper
Karen Cooper | Sr Retail Loan Originator ! NMLS # 223305 | 360 Mortgage Group LLC Austin Texas - Leander, TX
Helping Homeowners w/Home Loans in 27 US States

Joseph - Rates are off again this morning, so there's a strong likelihood these borrowers will experience just that. Thanks for stopping by.

Jul 27, 2009 02:48 AM #52
Andrea Curtis United Country Premier Properties Certified Military Relocation Professional
United CountryPremier Properties - Harker Heights, TX

Karen you did the right thing.   We have only so many hours in the day.  I too enjoy educating my clients BUT  when you have those that just WILL NOT listen it is time to cut them loose.    Have a great week!   You are doing fine!

Jul 27, 2009 05:45 AM #53
minette goldsmith

Wow, this touched a nerve!  I printed your comments out and will mention it with a copy to some of the people who do the same to me.  And, now, besides being surprised at the end, they will have additional delays with the closing because my guess is at the last minute the APR will increase more than the .125% allowed by MDIA, and they will have to wait the extra days to close!  

I often do not lock the rate at application but I make it very clear to clients that the loan is not locked and we will watch rates daily and lock it with their agreement sometime during the loan application period.  We will try to get them the best rate I can. If they would rather lock upfront, once I have all the information, I will do that too. This continues to build the connection.  

Thanks for putting this down on paper.   

Jul 27, 2009 06:42 AM #54
Karen Cooper
Karen Cooper | Sr Retail Loan Originator ! NMLS # 223305 | 360 Mortgage Group LLC Austin Texas - Leander, TX
Helping Homeowners w/Home Loans in 27 US States

Andrea - Thanks for your support and encouragement!

Minette - The lender these borrowers spoke to made it clear they wouldn't lock the rate in until later.  These folks seem to have selective memory and just latched on to this lender's rate quote that we know has already changed dramatically because the bond market has headed steadily upward since that day. Glad to be of help!

Jul 27, 2009 07:32 AM #55
Michael Mullin
Caliber Home Loans NMLS 15622, Originating loans in CA, OR and WA. - Bend, OR
NMLS 11911 - Branch Manager, FHA, VA, USDA, Conv

Karen, I've been playing with a client for three months under the exact same scenario with the exception I held off encouraging an applycation with me because I knew the gentleman was not yet convinced I could get him the "best" rate.  Well...he called a couple of weeks ago as I was preparing to leave for a weekend trip and my wife (we work as a team) took  the call and thinking he was serious offered to have him stop by the house before we left so I could look over the internet quote he got. ARGHH!!!  The buy made a half hour drive and I only had to take a 30 second look at the GFE the internet lender had prepared to be pretty sure they were bluffing - I mean their quote was under the wholesale cost for goodness sake. Similar to you I told this gentleman to go ahead an apply but not to let them charge his credit card.  Sure enough, I got an email message later that day letting me know that after he applied the "locked" rate the lender offered was .5% higher than their quote.  Of course it was.

You made the right choice, and even if the client doesn't come back you know you did the right thing for them.

Jul 27, 2009 09:02 AM #56
Karen Cooper
Karen Cooper | Sr Retail Loan Originator ! NMLS # 223305 | 360 Mortgage Group LLC Austin Texas - Leander, TX
Helping Homeowners w/Home Loans in 27 US States

Hi Michael - The client called again this morning. They just don't get it! I figure if they catch me in between calls/appts, I'll give another brief explanation, but who has time? Thanks for stoping by.

Jul 27, 2009 12:54 PM #57
Kristeen Smith
First Portland Mortgage Corp - Portland, ME
Maine Mortgage Specialist

Yes, having been in the business for 20 years myself, you know when it's time to give up on a customer.  These people were not worth your time. 

Jul 31, 2009 01:44 AM #58
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