Fake It Till You Make It...The Aftermath of the First Refi Boom!

By
Mortgage and Lending with Oak Valley Mortgage-California Home Loans and Refinancing

I don't need to refinance...I have a 30-year fixed!

After looking at your Promissory Note, you may be suprised!

With the craziness of the "Refi Boom" and the historical levels of appreciation in Real Estate an influx of loan officers came into the mortgage industry to make a QUICK BIG BUCK! Mortgage companies were hiring people left and right to simply keep up with the phone call demand and in most places there was a revolving door...If the new guy didn't make it as a salesperson...the next one was hired. I witnessed mortgage brokers giving their loan officers incentives to get deals closed on the phone, such as new cars, trips to exotic places and the such. This influx and crazy period a few years ago brought in a large amount of fresh loan officers that were new to the business...following a coin phrase I've heard in Real Estate..."Fake it till you Make It!"

Well, many did "fake it!" They didn't have the proper training because the Brokers were too busy breezing over files when needed. They faked it so good that they didn't really understand the terms they were selling in the first place and they didn't think about social responsibility, a family's future and the devastation that could be caused by a person not understanding the terms on their mortgage. The game played out on both sides.  With the influx of Stated Income loans to the scene, the borrowers faked the income and the loan officers faked the verification of documents reflecting that income.

And now...We have close to 2 TRILLION DOLLARS of adjustable loans set to "readjust" over the next few years. $1 TRILLION in 2007 alone!

Many homeowners are going to see a sharp spike in their mortgage and I believe it will create a second "refi boom." The difference this time though is that many of the loan officers that came in for a quick buck are somewhere else with the mess to be cleaned up by the true mortgage professionals that look at their business from a long-term approach with clients and not for the sake of making the "quick buck."

I've had several potential clients over the past few months stating that they have a 30 year fixed at X rate and everything is great...There's no need to refi. Well, after telling them to check the terms on their Promissory Note, they come to find out that the verbiage used with them over the phone with the slick or nieve salesman a few years ago pitched the loan as a completely different product! To which I now need to reply...I'm sorry sir, but what that person should have said is that it is amortized over a 30 year period, but it's an adjustable rate loan that is fixed for 2,3,5,7 years and flips into an adjustable loan....Ouch!

If you have found that you are in this situation with your mortgage in California...Give me a call!

30 Year fixed loans are very competitive with the adjustable rates these days. If your intentions are to be in your home for a while, let's get you into what you initially wanted...A 30 year fixed!

Scott Gormley
Broker/Owner
Oak Valley Mortgage
2006 Chico Assoc. of Realtors Affiliate Chairman
Direct: 530.592.8362
Fax: 530.267.5555
Website: http://www.CALoan.com

Blog: http://www.CARealEstateBlog.com

"You find the perfect home, we'll find the perfect loan!"

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Rainer
214,437
Eddy Martinez
Nationwide Funding Group - Highland Park, CA

You speak the truth buddy. These particular clients had 5 years ARMs that they closed in 2002 that the broker or loan officer told them were  "30 year fixed" mortgages. The note tells the story not the previous loan officer.

Eddy

May 01, 2007 01:33 PM #1
Rainmaker
298,397
Ray Saenz
Exit Realty Laredo - Laredo, TX
Homes for Sale in Laredo, TX - Texas, Realtor

Scott,

Great info, thanks for sharing it !

 

May 01, 2007 07:28 PM #2
Rainer
4,590
Ian Fregin
UCM - Virginia Beach, VA

You know what's really sad about this whole story? The borrowers who fell for the whole pie! 2 year ARM, interest only payment, 100% financing, bought just as the market was beginning to turn but agents didn't see it yet. I have one of those right now (a client, not that loan), set to adjust in November and guess what? Value has decreased by at least 10%! And my clients knew they were getting an ARM, but they "thought" it was fixed for 5 years...surprise!

 

May 02, 2007 09:14 AM #3
Rainer
60,118
Steven Shewell
Primary Residential Mortgage, Inc. - Ephrata, PA
The Mortgage Maverick
There are alot of deceptive lenders out there.  As I find them and can validate their dishonesty, I report them to the state banking commission.
May 02, 2007 07:53 PM #4
Rainmaker
183,997
Janet Guilbault
Platinum Home Mortgage Company - Walnut Creek, CA
San Francisco Bay Area Direct Mortgage Lender

I joined the mortgage business post refi boom and with a whole data base of auto lease clients from my former job. I was shocked to discover how many people described their mortgage as "some funky thing I need to get out of". Worse was how obvious it was that the refi boom had sunk customer service in the industry to a very low point. The good news: how easy it was to get these customers to refi with ME!

Great post with much truth.

May 03, 2007 01:31 AM #5
Rainer
4,590
Ian Fregin
UCM - Virginia Beach, VA
I have to say though, for all the crappy lenders and crappy loans...I really feel some of the blame needs to rest with the borrowers. Of course there were some borrowers who were just plain taken advantage of. But there were also those who did not read their documents or did not ask any questions or did not look over their loan application before signing. Regardless of how much my clients trust me or whatever, I always tell them that they should read each page at closing before they sign. I mean, I don't personally put together their closing package, so I can't be sure until we're at the table that every doc is exactly as it should be. I haven't had a problem yet (fingers crossed), but I still cringe when clients just sign away with no attention paid to what they are signing. I mean...these people are borrowing hundreds of thousands of dollars and often act like it is a hardhship for them to spend an hour or two sealing the deal. I would rather see a borrower read everything, understand all of it and happily sign than see them gloss over all of it, sign away and wonder why they had to sit through all of that, you know? When my girlfriend bought her house, I did her loan of course, and she read every single page and asked a ton of questions. I felt like an idiot at the time, but she felt great afterward and really understands what she did that day.
May 03, 2007 01:44 AM #6
Rainer
214,437
Eddy Martinez
Nationwide Funding Group - Highland Park, CA

Ian thats a great point borrowers also have to be accountable for their lack of research when they close on loans they dont understand or need. I have also had conversations with borrowers who signed loan docs and had no idea what they were signing for.

Eddy

May 03, 2007 06:42 AM #7
Rainer
7,301
J.R. Quarles
Mortgage Executives LLC - Memphis, TN
The Mortgage Innovator
Great info... very good post
May 04, 2007 12:23 PM #8
Rainer
3,763
lorraine leff
first american lending - Riverside, CA

What you said so true, and so unfortunate for so many consumers.  I've been in the mortgage business for 20 years, and it is always breaks my heart when I know someone was being suckered, or was suckered into some loan that they never intended to get... meanwhile the loan rep could give a S- - - they got there commission.  I  guess the fallout of alot of these loan reps is a postive to look at with the current meltdown.

May 04, 2007 12:37 PM #9
Rainer
214,437
Eddy Martinez
Nationwide Funding Group - Highland Park, CA

On the flip side , I have know loan officers who faked it and never made it. They lied to clients and their clients simply didnt make any payments and let their houses default resuliting in foreclosure. The honest professionals in this business will always endure any change in the market.

Eddy

May 05, 2007 09:46 AM #10
Rainer
187,606
Scott Carson
WeCloseNotes.com Inc - Austin, TX
The Note Guy
I agree with Eddy and Scott (Not me) wholeheartedly on this issue.  Those LO's and brokers who are unethical will be looking for new lines of work very soon!
May 07, 2007 08:26 PM #11
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