ARM Nightmare: A Real Life Story

Mortgage and Lending with Your Tampa Bay Mortgage Source

Save meI want to share a story with you.  It fits in perfectly with the current market and the outrageous number of homeowners who are facing the reality of adjusting mortgage rates and increasing payment.

Back in May 2005, I had a customer referred to me by another customer.  He was a first time homebuyer and going through the mortgage process for the first time.  We sat down together and discussed mortgage financing and what type of mortgage would be the best fit for his situation.  I set up a mortgage option for him offering him a 30-year fixed mortgage at 6.125%.  It was my best recommendation,as he was planning on staying in this home for at least the next 10-years.  We discussed ARM's and how it wasn't really the best option because he would have to refinance and loose equity when he was going to be staying in the house.

He rate shopped me, which is okay, he needed to explore his options and I was understanding of that.  He ended up going with a mortgage broker who, he told me, offered him a better rate.  I tried to discuss with him more information to make sure this new loan was a good fit, but he was focused on the lowest rate and couldn't get past it.

Fast forward to May 2007, the same customer of mine that had previously referred this first-time buyer called me.  "Leah...Andy needs your help".  He told me how he was put in an ARM back in 2005 and now it was adjusting.  So, we spoke again.  He explained to me how he was very upset that his payment was adjusting and he didn't know what to do.  After some research I found out that he was put in a 2-year adjustable ARM.  (Note, he was in a rate at 5.875%).  To boot, he had a prepayment penalty on the loan.  So, here we are 2 years later again looking at the best loan options.

You may think it ends here...nope, there's more! 

I went through the mortgage process with the customer again, quoted another 30-year fixed rate on the refinance.  He now understands the importance of a fixed rate mortgage.  We went over a good faith estimate and the new mortgage rate.  He was SO excited and we set up an appointment to do the mortgage paperwork.  Here's where it gets sticky.  In the meantime, he had called his first mortgage broker.  After weeks of not receiving a call back and speaking with me, his first mortgage broker finally called back.

The customer called me prior to our appointment and the conversation went like this.  "Leah, the other mortgage company is offering me a rate that is .25% lower..."  I didn't give up on him.  We discussed closing costs and how a rate doesn't necessarily make up the whole picture.  It didn't matter.  He was again sold on the rate.  So, okay, the customer is always right.  I told him to do what was best for him and that I would be here if he had any questions or needed anything.

Fast forward to this week.  The customer called saying "You don't know how red my face is right now..."  Yes, you guessed it, that pretty mortgage he was quoted changed right before closing and now he was suppose to close bringing $3000 into closing (something he wasn't expecting in the beginning).  Believe it or not, he now understands the mortgage process!!  We are working now to put him into the right loan and I have a customer for life.

I tell you this story not as a mortgage lender looking for a pat on the back, but rather to show how easy it is to get sucked into the "best rate" philosophy.  It is crucial to work with a mortgage consultant who has your best interests in mind and tells you the whole story!  Be oh so careful as you rate shop.  This customer will end up almost a full point higher on his interest rate than he would have two years ago, plus will loose equity in the refinance between costs and his prepayment's a costly price to pay for a lesson learned.

Are you looking for the best rate possible for a home in Tampa or Hillsborough County?  Talk to a professional about the best loan for your long term financial goals before you go with the "best rate".

Comments (20)

Endea Thibodeaux
Lanham, MD
Solar Energy Consultant, CDPE, CLHMS
Good job.  I see you are a BRO member I am also.  I have a client like that now who keeps changing first time Buyer programs because of the rates.  Some people will do anything for a lower rate! Even if it's a $25.00 difference.
Jun 14, 2007 11:53 PM
Brian Schulman
Coldwell Banker Residential Brokerage, Lancaster PA - Lancaster, PA
Lancaster County PA RealEstate Expert 717-951-5552
Leah, you write well about a phenomenon which is all too common.  I keep trying to convince buyers that there is more to the mortgage business than getting what on the surface seem like the lowest rate.  At least you are lucky that this foolish buyer actually came back to you.  Even then he hadn't really learned his lesson.  Many such buyers would be too embarrassed to come back.
Jun 15, 2007 12:16 AM
Paul Moye
Benchmark Realty - Franklin, TN
Broker, GRI, SRES

Take this as it is meant, with the best of intentions. That person was an idiot and is an idiot who "knows more" in their mind than a professional. That is how they started with an ARM and kept believing the ##**&! the other Lender kept telling them.

You did a great job, the other Lender was too greedy the last time to realize this customer did not have $3000. If the other Lender had dropped his fees (profit) lets say to $1000 this customer probably signs up with this other Lender.

I applaud you for your efforts and success but no matter how hard you work you can never solve 2 issues;

Ignorance and Poverty. Sadly, these 2 issues go hand in hand.

Jun 15, 2007 12:26 AM
Jeff Belonger
Social Media - Infinity Home Mortgage Company, Inc - Cherry Hill, NJ
The FHA Expert - FHA Loans - FHA mortgages - USDA loans - VA Loans

Leah....great story. Many clients just hear rate and it's sad because of the lenders out there that don't explain it in detail. It actually pains me. And life is funny... I always thought I was always one of the few lo's that was this passionate and knew what they were talking about. I wrote this a while back : Mortgage Shopping -- Rate vs Payment.....  I even did one on....  Shoppers that shop themselves right out of the market, back on 10/25. 

Again, good job...

                                                                                                              jeff belonger

Jun 15, 2007 12:33 AM
Thomas Weiss
Thomas R. Weiss - West Palm Beach, FL

WoW... I hear these all day long if anyone gets a chance i am going to try and repost a blog i put up a couple of days ago, please read and save for your clients. If you want as well go to my site and look at consumer affairs mortgage quotes...

Good Luck..


Jun 15, 2007 12:34 AM
Doug McAnally
RCP Realty Group, LLC - Calera, AL
Working Hard to Make your Experience Easier


This was a great post. It is nice to know that you care about the people you work with and it is not just another transaction. The easy thing to do would have been to let him go  but you didn't and I applaud you for that.


Jun 15, 2007 12:40 AM
Cyndee Haydon
Charles Rutenberg Realty - Clearwater, FL
727-710-8035 Clearwater, Beach Short Sales Luxury Condos &Homes
Leah - how well said - GREAT job Explaining the difference between "rates" and "reality" - You ARE the best - I feel so blessed to get to work with you regularly.  
Jun 15, 2007 02:43 AM
Leah Ross
Your Tampa Bay Mortgage Source - Tampa, FL
Tampa, Florida Mortgage

Edna, thank you for the comment my BRO friend!  All we can do is try our best to educate the consumers and continue with our BRO mindset :)

 Brian, I appreciate the comment!  Yes, I do consider myself very fortunate!

Paul, thank you for the comment, and the chuckle.  It is so hard to educate people sometimes because of all the bad business being done, consumers have a hard time knowing who to trust!

Jun 15, 2007 03:11 AM
Leah Ross
Your Tampa Bay Mortgage Source - Tampa, FL
Tampa, Florida Mortgage

Jeff, thank you for your comment!  It is nice to know that there are us "good guys" out there!  Thanks for the great blog link too!

Tom, yes, I will check it out!  Thanks for the comment!

Doug, thank you for the nice words.  Sometimes it can be hard to bite our tounges, but I just know it will all work out in the long run...karma, right?

Jun 15, 2007 03:13 AM
Leah Ross
Your Tampa Bay Mortgage Source - Tampa, FL
Tampa, Florida Mortgage

My dear Cyndee, thank you so much for your support!  I am also blessed to have you on my side :)

Jun 15, 2007 03:13 AM
Thomas Weiss
Thomas R. Weiss - West Palm Beach, FL

I would hate to say but you are a rarity in todays market, honesty is right though, but you will get walked on. My advice is don't change anything because the no good liars!!! will be gone soon enough.

Take care,


Jun 15, 2007 03:30 AM
Susie Roscoe
Signature Realty Associates - Brandon, FL
Real Estate Specialist | Brandon, FL
Leah - What an amazing end to the story!  You were "there" for him every time.  KUDOS for being professional and patient...every time!  He should be a client for life now---you've earned that not once, twice but all 3 times and THANKFULLY he knows!! 
Jun 15, 2007 06:36 AM
Susie Roscoe
Signature Realty Associates - Brandon, FL
Real Estate Specialist | Brandon, FL

Leah, I love the new picture!!  You look GREAT!!

Jun 15, 2007 06:37 AM
Jack Haydon
Charles Rutenberg Realty - Clearwater Beach, FL
Clearwater Beach Condos - Real Estate Homes for Sale


Great job explaining why interest rate is not the only factor when getting a home mortgage. I am very pleased to be working with you because i know you will always put the client's interests first, and i know you are very good at what you do, so my clients will always be well served.


Jun 15, 2007 01:34 PM
Katrina Madewell
Charles Rutenberg Rlty- More than 5,000 agents(813) 777-1196 - Tampa, FL
Tampa FL Homes for sale | Tampa Bay - (813) 777-1196

great pic leah, even better post!!!!!!!!  Its amazing how people are so QUICK to rate shop you over a .25% or .125% rate difference.  Most of these ALWAYS end up NOT as planned!  Guess this guy just needed 3 times to figure that out.  Really he's LUCKY you are YOU, and you didn't say... "if you want more of what you've got, do what you've always done"  "IF you want something different, DO SOMETHING DIFFERENT!"

When he mentioned that other broker AGAIN, I would have been like "MR Client, how's that work out for ya the first time?"  YOU ARE SO NICE!!!!!!!!!!!

Jun 15, 2007 09:06 PM
Marlene Bridges
Village Real Estate Services, Inc. - Laguna Hills, CA
Laguna Homes|Laguna Condos|Laguna Real Estate
Leah - Kudos to you for taking the high road!  Doing what's right may not be the most expediaent or profitiable at the moment, but in the long run it'll keep you in business when the others are bailing out!
Jun 16, 2007 05:37 AM
Leah Ross
Your Tampa Bay Mortgage Source - Tampa, FL
Tampa, Florida Mortgage

Tom, I know I am a rarity, but I love the way I do business!  I am blessed to have the integrity to do the right thing for our consumers!

Stephanie, WOW, I didn't realize Colorado was dealing with so many foreclosures!  You keep up the good work too!

Susie, thank you for both comments!  I am glad you like the picture upgrade too!


Jun 18, 2007 11:09 AM
Leah Ross
Your Tampa Bay Mortgage Source - Tampa, FL
Tampa, Florida Mortgage

Jack, thank YOU for being the same way!  It makes it so easy to work with you!

Katrina, thanks for the comment!  It's hard sometimes, but we just have to do the right thing and realize that most consumers don't have the same knowledge we all do...keep on keepin' on!

Marlene, thank you for the kudos!  I am in it for the marathon, not the sprint!

Jun 18, 2007 11:11 AM
Susie Roscoe
Signature Realty Associates - Brandon, FL
Real Estate Specialist | Brandon, FL

Hey Leah!!  I'm baaaccckkk!!!! It's early...I'm not sure I'm ready to work but YOU ARE MY PARTNER for accountability so I'm telling on myself NOW that I'm back!!  We'll be talking soon...

Jun 24, 2007 09:28 PM
Leah Ross
Your Tampa Bay Mortgage Source - Tampa, FL
Tampa, Florida Mortgage
Glad to have you back Susie!!  OKay girl, it's on...I'll be emailing you later to follow-up with you on your progress ;-)
Jun 25, 2007 01:03 AM