Homeowners and homebuyers have plenty of reasons to be both suspicious and cautious about working with mortgage lenders in the aftermath of the great mortgage credit meltdown of 2007.
There have been so many changes to lending guidelines, laws and programs that it’s almost impossible to keep up with all of it.
What this means to mortgage professionals like myself is that we have to work extra hard to keep up with all of the changes on a weekly, monthly and yearly basis.
Don’t feel sorry for bankers for all the extra work, that’s what we do, it’s our job to keep on top of all of the guidelines and changes in the mortgage credit markets.
There have always been lazy lenders that spend more time worrying about commissions than they spend trying to help clients, I don’t expect that to change anytime soon.
This behavior has always been the exception, not the rule. As a result of more regulation and tighter oversight, I don’t think greed is as much of a problem in today’s market.
I believe that the root of most of the issues I see today is a result of lazy, or uninformed lenders, and an unwillingness to be honest with borrowers if they don’t know the answers.
If you’re reading this, you’re one of over 10,000 readers that visit this site every month. Because we have so many folks stopping by, I get questions and comments every day.
Some days I find myself at a complete loss to understand why a lender or loan officer would purposely mislead, misinform, and even straight out lie to consumers.
It reminds me of those online dating horror stories that you hear about where one of the “daters” uses a fake picture and bio, which is discovered once a face to face meeting happens.
It simply doesn’t make sense to me that a lender would purposely mislead a consumer to believe that they qualify, or don’t qualify for a home loan, only to discover later that the original solution offered is unachievable or completely inaccurate.
The thing that bugs me most is that because I do spend hours and hours every week reading guidelines, I know immediately what the lie is, and why the lender is lying.
I call it a lie, but ultimately it’s a lack of education on the lender’s part. The lie happens when the lender does not admit that they do not know the
Here are a couple of stories from the past week:
This past week, I encountered two different scenarios that pushed me to the edge of my patience.
True Story #1 – It’s Not Me, It’s Fannie Mae
The Lie – This first story comes from a homebuyer that is trying to purchase a condominium in the State of California. We work very closely with the buyer’s real estate agent so they were referred to us for a second opinion.
The lender that the borrower is talking to told them that recent changes Fannie Mae now requires that Condominiums cannot close inside of 40 days.
WHAT?! – Fannie Mae creates underwriting guidelines – They DO NOT place timeline restrictions for closing on Condominiums.
The Why? – The only reason I can think that this lender would so blatantly lie is to create an excuse for their inefficiency or slow processing times.
True Story #2 – Dodd-Frank Did it
The Lie – My second story is about an email exchange I had with a home buyer in Colorado applying for a Veteran loan.
Initially, the homebuyer called me after a Google search about VA Manual Underwriting. The question was about the debt to income requirements when manually underwriting a VA loan.
The thing with manual underwriting is that it is not easier to qualify, it’s actually more strict than getting an automated underwriting approval.
The lender that this Veteran was working with told him that the Dodd-Frank Act changed the debt to income ratios and he would not qualify.
WHAT?! – Dodd-Frank was the massive Wall Street Reform and Consumer Protection Act that was responsible for creating the Consumer Financial Protection Bureau to police lenders and protect consumers.
There is nothing in the Dodd-Frank Act that even comes close to requiring the underwriting and qualifying requirement of VA loans to be changed.
The Why? – I actually encounter this type of lie quite often with specialty products, like Veteran loans or First Time Homebuyer Assistance loans.
I categorize this type of lie as a sort of hybrid Bait & Switch strategy where the lender never intends to provide the original loan and strings out the homebuyer so long that the only way to not lose the home is to take the loan the lender intended to offer in the first place.
In this particular case, I don’t think the lender went into it with malicious intent, I think it’s actually worse than that. I would suggest that the lender is not educated or experienced with the loan program that the borrower is trying to use.
Instead of telling the homebuyer that they don’t have experience with this loan, they lead you on to get a commitment, then hit you with a ridiculous explanation at the last moment.
Qualifying for a home loan is much more complicated than it’s ever been. There is more paperwork, tighter guidelines, and more verification required to check and double check the information you’ve already provided.
Trust your gut – Seriously, if it sounds too good to be true, or if it seems like it’s just too easy, that should be a red flag.
Online Research – Do your research online while in the pre-approval process.
If the loan officer is the actual person writing about your topic of interest, there’s a strong possibility that the lender has thoroughly researched the topic before putting it out on the internet.
The beauty of the internet is that you can do research on your own without making your lender feel like you don’t trust them. Yes, it can be just as confusing trying to sort out what’s accurate and what’s not, but believe me when I say that the time and effort is worth it.
Reach out to Lenders out of State – Most lenders are following the same underwriting guidelines if you are trying to qualify for Fannie Mae, FHA, VA or USDA financing. The qualifying guidelines are the same regardless of what State you’re buying in.
If the lender is not trying to get you to do business with them, you’re far more likely to get answers that do not include a “sales pitch”.
If you are concerned that your lender is not up to date, lazy or actually lying, feel free to ask your questions below. I am a direct mortgage lender that can only lend in California, and I answer all questions regardless of whether or not we can do business together.
Ask your questions below in the comments section, shoot me an email, or give us a call. If we don’t know the answer, we’ll look it up! Hope this helps?
If you have an emergency, try our Loan Rescue hotline here.