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Home Loan Horror Stories - Protecting Veterans from Over Charging

Veterans Be Aware! 3 Veteran Home Loan Horror Stories

Veterans that have served, or are serving in the Armed Forces have access to a special mortgage program that allows an eligible Veteran to buy a home with ZERO down payment.

VA No Down Payment Home Loan

Eligible Veterans can buy up to the Fannie Mae Conventional loan limit of $484,350 anywhere in the U.S., and up to $726,525 in high-cost Counties.

Using the VA home loan benefit, an eligible Veteran can typically buy a home with very little out of pocket costs, unless you have the misfortune of choosing to work with a high overhead lender.

How Does This Happen?

In this conversation, I asked two California based loan officer friends to join me to discuss experiences we all recently had where Veterans fell victim to the unethical business practices desperate lenders and the inexperienced loan officers they hire.

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It truly is tragic when you hear these stories over and over again about lenders that they pillage borrowers using FHA or VA mortgages due to the high cost of running their business and paying for television ads.

Fighting Back

Through the wonders of modern technology and social media sites, independent experts like Teresa, Caton and I have a platform for exposing these business practices and helping consumer Be Aware that there are other options.

You can almost 100% know that if you see a TV commercial for a lender offering VA loans to Veterans, or any TV commercial for a home loan that you are going to inevitably pay for that advertising directly out of your pocket in loan cost and interest rate.

This is your best case scenario.  Your worst case scenario is that you are strung along and do not realize that you are being told inaccurate information about your ability to qualify, or worse yet, you do qualify, but you are being charged tens of thousands of dollars that you should not have to pay.

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Veterans “BE AWARE” of Your Options

How do you know if you’re being ripped off or misled?  Quite honestly, it’s difficult.  Here are a couple of things I typically recommend that can help you identify if the person you’re speaking with is looking out for your best interest, or just telling you what they think you want to hear.

  • Does it sound too good to be true?
  • Does it sound too easy?
  • Is every answer from the loan officer an emphatic “Yes”?

Make no mistake, the process for applying for, and being granted hundreds of thousands of dollars to purchase Real Estate is a relatively intrusive, and documentation heavy process.

These lenders that try to make it seem as easy as ‘push button, get loan’ are straight lying to consumers.  That does not exist in today’s market.  At least not yet.

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The types of companies that pay for Television advertising do not typically invest in hiring professional and experienced loan officers.

Almost all of these company that make offers that seem too good to be true, or that offer to let “lenders compete” for your business, these calls all go to a call center somewhere where you are connected with someone trying to “hit their quota” so they can make a bonus for the day.

Page 2 of Your Loan Estimate

Several years ago now, regulations changed and you will no longer receive a “Good Faith Estimate” that breaks down your loan terms and costs.

This form has been replaced by the “Loan Estimate”, which should be sent to you within 3 days of sending your lender all of the information required to make a credit decision (mortgage pre-approval).

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On page 2, Closing Cost Details, the first section in the upper left corner is Loan Costs.  This is where you will find (A.) Origination Charges, which include origination fees, points, discount or “buy down” points, and any other junk fees they throw in there.

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The above image is a Loan Estimate for the story that I tell in this video.  The misleading information that would have put my client in a very bad situation was a higher interest rate, that $3,800 origination charge that we do not charge at BuyWise Mortgage, and they miscalculated his property taxes.

This section is not the only place to look for junk fees or inaccuracies, but it’s the most common.  If you’re being over-charged by one lender, your other loan estimates will make it stand out.

Here are the A. Origination Charges from both Teresa and Caton’s stories.  Both of their clients were refinancing their VA mortgage.

Caton’s client is being charged $18,283 in Origination charges, which is made of up buy down points and origination points. Caton tells the story best below, but essentially, this Veteran was being charged $18,000 for a 5.25% interest rate.

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Caton Del Rosario Closing Costs Section of Loan Estimate

Caton was able to lower the Veteran’s interest rate by over 1% AND eliminate the $18,000 in costs. How is this legal you ask? That’s the $18,000 question.

The answer, unfortunately, is that following the law is not necessarily the same thing as protecting Veteran consumers.

Teresa Tims Closing Costs Details on Loan EstimateIn Teresa’s scenario, the cost to buy down the interest rate.

The  addition of the Administration fee makes this a very expensive loan.

Luckily, Teresa was there to offer a second opinion.

 

The Interview

There are some very important points to take away here.  First, there is a problem in our industry, and folks applying for Government FHA or VA loans are not aware that there are much less expensive options, from more experienced loan officers.

In this interview, I talk to Caton Del Rosario from Nu American Mortgage in San Diego, California, and Teresa Tims of TDR Mortgage and Real Estate based out of Upland, California.  With BuyWise Mortgage in Huntington Beach, we pretty much have Southern California covered.

If you are a Veteran yourself, or if you know a Veteran that is thinking about a refinance or new home purchase, please forward this article or video to them if you think it will be helpful.

Scott:
Well, welcome, everybody. As advertised, I’m Scott, and I’ve invited a couple of my loan officer friends. We have Teresa Tims here and Caton Del Rosario. I hope I didn’t butcher that too bad.

Caton:
Nailed it. You got it right on the, better than most, for sure.

Scott:
Awesome. We are all mortgage professionals, and there’s been a lot of information in the news, and there’s been a lot of stuff.

There’s been a lot of things that even in our circles, the mortgage market is changing, and the mortgage industry is kind of changing a little bit, and sort of an unintended consequence of some of the shifts that are going on in the market is veterans are becoming victims of bad business models.

We all have great stories to tell, and I’m gonna go ahead and start off with what my story is, and then I’m gonna ask Teresa and Caton to share their stories, and then we’re gonna talk about, just discuss how consumers, how veterans and veterans’ families can be aware of some of these things, and kind of protect themselves and know what to look for.

Scott:
In my particular situation, I had a situation where I was working with a veteran, and he was a home buyer. He was a first time home buyer, had a fiancee, very young child, buying their first home, and he ended up, he was asked by his boss to shop around.

Make sure you’re getting a good deal, ’cause he was stressed out about his payment. So he called Quicken. He called Rocket Mortgage, because he saw a commercial for it, and they’re super popular.

Well, they sent him out a quote. So he calls me up, and he tells me, “Scott, I appreciate everything you’ve done for me, but I’m gonna go with this other company, because they offered me a lower payment.” I said, “You know what? That’s fantastic. If you can get a lower payment, then more power to you. Why don’t you send me over what they sent you, and let me just take a look at it.”

Scott:
So he sends it over, the interest rate is a quarter percent higher than what I’m charging, they’re charging origination fees of one percent of his loan amount, and the payment was $200 lower. After looking at it, I recognized that they did not have his property taxes calculated correctly. Now, this works great if you are a slam-bam refi shop.

Because a refi shop in California, the way that we calculate property taxes, sometimes if you’re refinancing you keep your property taxes, but when you buy, your property taxes are reassessed. I was livid. I was absolutely furious.

I hopped online, I talked a lot of mad trash on Quicken, and I got a cease and desist letter from their lawyers. They made me pull everything offline.

Scott:
I’ll admit, I was out of line. I said things, I phrased it within the metaphorical context of a courtroom drama, I phrased it as this was the crime, and here’s the verdict, all this. They didn’t like that at all. And I get it.

I stepped over the line. But that doesn’t excuse the fact, so and 100%, I want to be 100% clear here, they did not do anything illegal. They made it very, very clear, their attorneys made it very clear to me that it is a perfectly acceptable practice to send out an estimate without accurate fees, that they can correct later.

And they are 1000% right. That is not against the law. Is it ethical? I don’t think so. But that was my story, and that was just one of the things that I ran into, and now we’re starting to see this a lot more.

This was November, so this was on Veterans’ Day. I think maybe that pissed me off just a touch more, but that’s what really set me off.

Scott:
Then just this last week, both Teresa and Caton posted online, they posted the loan estimates, and they had very similar stories, and I thought, “Man, you know what would be great? Let’s get on here, let’s talk about this.” I have a real problem with the phrase buyer beware.

That’s always consumer beware. Buyer beware. I think that’s somewhat evil. What I want to do, and what we’re trying to do here, is we want buyers to be aware. Be aware that there are options, be aware that there are different ways of doing things, that different companies do things in different ways. That’s really what we’re trying to accomplish here.

Scott:
So Teresa, you just posted, and actually your post kind of tipped me over the edge, and I said, “Hey. Let’s circle back with Caton. Let’s get online here, and let’s talk about this.” So why don’t you introduce yourself and share your story?

Teresa:
Well, first of all, Scott, thank you for having me, and I appreciate all of the advocacy that you offer to veterans and our community in general. My name’s Teresa Tims, I’m president of TDR Mortgage.

I serve the southern California market, and VA loans are one of my specialties, and one of my passions. My post, I didn’t mention any names, because my post was a little bit on the passionate, colorful side, which goes in line with my personality, and my situation, I have a longtime past client, they’re wonderful, young couple.

I’ve done probably five loans for them throughout the years. Sometimes when a client calls in, and you don’t quite give them the news that maybe they want to hear, sometimes as a consumer, you don’t know what is all out there. Sometimes you think there’s stuff that maybe your particular loan officer doesn’t know about.

Teresa:
I’m always acting in my client’s best interest, and when I’m giving them advice, I’m giving them their option, but then I’m also telling them what I think that they should do. And with the education information that I give them, I’m empowering them to make a decision that’s best for them and their family.

They may not agree with what I say, but in the instance of this particular client, I was just … So she called, a lot of clients are keyed into their rates, and the rates have come down a lot, and every other month for some clients, I’m doing an estimate of, “Hey, today this is what it looks like. I’m sorry, it’s just not low enough. We need to hit this rate for it to make sense for you, and these are the reasons why.”

Teresa:
So I got the phone call, they sent me over the paperwork, and I’ve been doing loans over 20 years, and I get the paperwork, I look through the disclosures, and it’s not immediately clear to me what this loan is, or how it looks.

I just see a low rate, and I’m like, “Oh, wow. Okay. Low rate, great, check.” And then I look at the loan estimate, and then in horror, I looked at what the cost was, and the VA loan goes to a high cashout amount, in some cases, it goes to 100% cash out.

Teresa:
Regular conventional loans, as you guys both know, the standard is 80% FHA, 85. So my clients were getting 20 grand, and they were gonna save 100 bucks. They were stoked, right? 20 grand, save 100 dollars, but what they didn’t realize is that their loan amount was going up 45 thousand dollars.

So to get that 20 grand, and to save the 100 dollars, it was costing them $25000. I just was all, “Ah!” And then, of course, I posted about it, and then called them, went over the facts and explained why I didn’t think it was a good idea, and they completely agreed once I was able to show them what the loan actually was all about.

Scott:
That’s crazy. That’s shocking. Caton, I think we’ve saved the best for last, because I think yours is one of the most shocking stories I’ve seen in a really long time. Why don’t you go?

Teresa:
The best for last.

Caton:
It’s crazy, and by best, I guess probably we mean worst.

Scott:
Yeah.

Caton:
So, when I saw it, I really didn’t even believe what I was looking at when I first saw it, and it’s gone a little bit viral with the help of my good friend Chris Griffith, and others helping share the message, so the long and short of it is I’m obviously a loan officer, I’m here in San Diego with New American Mortgage, this new mortgage company that I’ve started.

Caton:
But basically, my girlfriend’s dad had seen a commercial on Fox News, and they decided, give it a call, for a VA refinance. This is a pretty typical practice. They knew I was a loan officer, so they asked me to take a second look at it, and I was completely blown away at what I had seen.

It was a standard VA cashout, consolidating the first and second mortgage, and they were paying a combined total of basically, effectively three basis points to get a way above market average rate.

I mean, this thing was five and a quarter, where I was getting at least a percent lower in that, and based on what the market’s actually doing. So it was crazy to me that they were effectively paying, the loan amount was 600000, so we were talking about 18 Gs to just originate the loan, without even giving them anything additional.

Teresa:
Wow.

Caton:
It was just insane that you were basically paying a two-point buy-down spread, and usually buydown points are there to give buyers access to lower rates, but in reality this company had set their margins in a crazy way, where the rates were extremely high, and the points were extremely high, and it was just one of the most insane things.

I laughed when I saw it because I didn’t believe it was real. I was like, “This has to be some sort of joke. Is this a conventional loan? I would probably understand, maybe?”

But it was just the craziest thing I had ever seen, where the margins at this company were so high that they could justify making borrowers pay two points to get an interest rate that’s at least a full point above the market average right now, and that was just the craziest thing, and I couldn’t believe it, and as the more this post had circulated, what was more shocking is that this is actually a very common practice, not just a singular outlier.

Caton:
So that was really interesting to me, and I think it just comes down to a lack of consumer education. Buyer be aware, as Scott said. Lots of buyers aren’t aware about their options and how to exercise them properly, and it’s harming the veteran community in general. I’m very passionate about veterans, you know.

I have lots of family members who are either active duty or veterans. And to see what’s happening here, and I live in San Diego. We’re a big military town. I see homeless veterans all the time, and these companies knowingly or not are helping contribute to that epidemic, really. It’s really shocking to see.

Scott:
This is probably a little bit industry insider, but the way that mortgage companies make money, they all buy money from the same places. All mortgage companies get their money from the same places, then what they do is they have to mark that up in terms of interest rates and processing, underwriting, different fees, origination fees, they mark those up to cover their overhead, and then that’s the interest rate that’s then delivered.

So the spread between what they buy the money for and what they sell the money for, that’s their profit margin, and that’s what they use in order to pay their bills. So I think, Caton, I think yours, as you said, it was a TV commercial. My experience was with another one of these companies that run TV commercials.

Scott:
They spend millions, hundreds of millions of dollars potentially on TV commercials, and all they tell you is very, very vague things. But in those business models, they don’t have small business owners like the three of us, that every single loan is our reputation. We’re in business because we’re passionate entrepreneurs. We do this because we’re trying to help people. ‘Cause this is a brutal industry. We would not do this if we weren’t getting some sort of emotional feedback from it, because the money’s not worth it sometimes.

Scott:
It is because we have to deal with things like this. We have to see people, we have to see people run into these problems. We see these things happen all the time, and consumers just don’t know. What would you say, I mean, what would you suggest, Caton, what are some things that you think consumers can do? What do you think is the first thing that they should do if they’re looking for a loan? [crosstalk 00:13:45]

Caton:
I mean I think the-

Scott:
They should call you if there is any-

Caton:
They should call me. They just call me. I mean the big thing is, I’m so passionate about the fact that we are in such a unique place right now, in 2019, where we all have access to a wealth of knowledge, literally in our own pockets.

I’m on my phone right now so I can’t show you, but we have a wealth of knowledge literally just a few clicks away,  just 10 years ago, at the height of the mortgage crisis, this knowledge wasn’t as easily available and accessible.

So I always try to say, “Education is power, and that alone is a currency in and of itself.” So try and get as educated as possible before you make a big decision like this. I was just meeting with a buyer today, and I told them, “Buying a car is a little bit easier, something that you can kind of DIY around. I could figure out how to buy a car by myself.

I don’t need a financial specialist holding my hand, teaching me how to buy a car. Buying a house is a completely different ballgame, especially here in southern California, where the average home price is half a million dollars if you’re lucky.”

Caton:
So being educated on how to exercise your options, seeing what options are out there, utilizing the technology that we have to make those educated decisions, searching online, finding local professionals, not just going to the first option that you see, I think is a big part of it.

Most consumers and it is the circumstance of the digital age, where the most convenient thing is what we end up going with.

I was in New York and I watched taxi cabs drive by me while I was waiting for my Uber. So same thing. It’s whoever gets in front of them first, tends to be the case. But I think consumers should do a little bit more due diligence and slow down their process.

Don’t be too worried about jumping into your first mortgage option. Take a look at at least three or four. That way you have more context of what’s going on, and you can get a little bit more transparency.

Teresa:
I like that.

Scott:
Would you add anything to that, Teresa?

Teresa:
Well, one of my biggest things is to educate the consumer, and I feel like I want them, I encourage them, understand what property taxes are, and how they’re calculated.

Go out and shop for a fire insurance policy, and I’m gonna get you one, and I’m gonna review it, and I’m gonna show you the differences, and I’m gonna show you how you can understand things, ’cause just because it’s in your monthly payment, doesn’t mean it’s not something that you’re responsible for and you should understand.

So I agree with Caton in that, learn, get out there. You’re buying a house for crying out loud. Learn about all of the elements that go into makeup of payments, and yeah.

Teresa:
I think that through the education, and then I do a lot of stuff where I’ll drill down on the steps that it takes to find a real estate agent or find a loan officer, and oftentimes I’ll tell my clients, “You know, I don’t think we’re a good match. I think you should maybe go here,” or maybe you’re questioning me, and I’m like, “Hey, you know what?

I’m so confident in what I’m providing, go to your bank or go to your credit union, get a second opinion!” I encourage my clients all the time to go get a second opinion, and I think that makes them feel really confident and secure that I am offering something of value.

Scott:
I want to circle back to the business model because I think that’s really, really important, and I think that’s a very, very high-level litmus test that I think people can pay attention to. All three of us are what’s called a mortgage broker. Mortgage brokers are independent companies.

We don’t have as much overhead as some of these big, big companies, and the real challenge with what some of these high overhead organizations have right now is that there’s just not a lot of money to be made, and anything other than government loans.

So that’s why we’re saying FHA. FHA’s the same way. I’m seeing FHA buyers getting the exact same rates and fees as VA buyers just because there are higher margins in government loans. There’s a little bit more money in there.

Scott:
So recognize the fact that there are direct lenders, there are banks, there are credit unions, and there are independent mortgage brokers. There are pluses and minuses for each one of those.

Going with a mortgage broker doesn’t automatically get you an ethical experienced loan officer, but it is absolutely a lower overhead business model, whereas some of these companies that have huge advertising budgets, it’s a machine. I

t’s a call center. They’ve got numbers. All they’re trying to do is meet their numbers, where the three of us are trying to get customers for life, and we’re trying to get people to tell all of their friends, “Hey, I have a friend in the business. You don’t ever have to worry about this again.”

Scott:
And I think that surprises some people because independent mortgage brokers really took the brunt of the big crash that happened in 2008, and the reason for that was because we’re all just entrepreneurs and small businesses. We didn’t have the same voice.

Who came in and stepped in and started blaming independent people? It was all of the big banks saying that there’s not enough supervision with these little guys. Well, you know why? Because the three of us don’t need supervision. We’re entrepreneurs. We’ve been banging this stuff out for decades in some cases.

Scott:
Caton, you’ve been banging it out, you probably haven’t, you were just a tot when I started, probably. But I’m glad you’re in the business, man, because we need people like you. We need people that know how important it is that we educated and inform consumers. Both of you guys do a really, really good job of putting stuff out on the internet.

Scott:
You can go to Teresa’s website, you can go to Caton’s website, and you’re gonna get educated about the mortgage process. You’re gonna learn about things. You’re gonna get to know, like and trust them. Like Caton was explaining to us earlier that before we went on air, that is he’s really passionate about, and it’s absolutely true.

You can take your time, you can talk to people, and don’t just automatically, if you just meet a real estate agent for the first time, and they say, “Here, use my preferred lender, but you don’t have a really, really close relationship with that real estate agent, don’t automatically assume that they’re sending you to the right person.

Scott:
I had a situation very, very similar to yours, Caton. It was actually the real estate agent’s brother in law worked at a different mortgage company, and he said, “Hey, this looks a little weird. Would you guys look at it?” Almost the exact same scenario.

It was almost two and a half points, and it was over a full percent in interest rate lower. Just based on our fee schedule and our interest rates, it saved this home buyer, it was a veteran, saved him over $400 a month on their payment. It was unbelievable.

It was absolutely unbelievable, and I’m telling you, most people don’t know that these things happen, but we see these things every single day, and it’s just absolutely obnoxious.

Scott:
So if you guys don’t have anything to add, I would absolutely want to put, I want you guys to put your information in here. People, look them up. We’re actually all competitors essentially, but we’re not. We’re all part of the same family. We care more about consumers. We know that we’re gonna connect with certain people geographically, personally.

We know we’re gonna peak people’s interest, and there’s enough business out there for everyone. You don’t have to lie, you don’t have to steal, you don’t have to cheat, and you don’t have to spend hundreds of millions of dollars on TV commercials in order to help a fellow human being and do the right thing.

Scott:
So I can’t tell you guys how much I appreciate you coming on here and sharing your stories. I think this has been incredibly valuable, and I hope we get an opportunity to really get this out there and help people make better decisions.

Teresa:
Great. Thanks, Scott.

Caton:
Absolutely. Absolutely, Scott. Thank you so much for having us, and I think more discussions like this are really gonna help move not just entire industry forward, but for the betterment of our consumers and the economy, as well.

As consumers get more educated on their options, they’ll have better access to the kind of options that were readily available, and $200 in payment is $200 that they can inject into the economy in some other places.

Caton:
It’s crazy. I think there’s just so much there. I’m so excited to continue these conversations. Teresa, thank you so much as well for sharing your story. You’re amazing. I can’t wait to connect with you outside of this as well, and I don’t know. I’m just so grateful to be a part of this.

Scott:
And you guys, you know the best way to stop this? Is to stop consumers from doing business with them. That’ll dry them up real quick. So I don’t think the three of us little guys can necessarily do that, but if we can build a village and we can have a single voice, we can get out there and we can help a lot of people.

Caton:
Absolutely.

Teresa:
Right on. Well-

Scott:
All right, guys. Have a happy Easter. Enjoy your weekend, and again, thanks so much. I look forward to connecting with all you guys later.

Caton:
Peace out. Shout out to LOD. You know who you are.

Scott:
All right, that, we are off the air.

Working with Professionals

I can not emphasize enough the importance of hiring a professional if you need a bankruptcy attorney, loan officer, or Realtor.

When you call a lender from a TV or radio commercial or click an ad you saw on the internet that has a catchy headline, you are playing competence roulette.

I personally have been in the business for close to 20 years and started this website 10 years ago to educate and empower consumers.

We have had over a million consumers visit this website and I have answered many thousands of questions from folks all over the Country.

If you are trying to buy or refinance your home in California, I can help.  You may ask questions about your options below, or shoot me an email directly to scott@buywisemortgage.com.

If you are outside of California, I can introduce you to a loan officer from our Expert Network that I personally know and trust.

About Your Expert

Scott Schang

A 20 year veteran of the Mortgage and Real Estate industry, I am passionate about educating and empowering consumers. I have been writing about consumer protection issues, and making sense of complicated real estate and mortgage topics on this website since 2007

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