January 12, 2010

My Mortgage Loan Horror Story

When I first bought my house around 11 years ago I found a mortgage broker in the local newspaper.  They advertised a good interest rate.  They even had the word 'integrity' in their name so they must be trustworthy, right?   I didn't do any research or ask anyone I knew for references.   Big mistake.

I called the company and I got preapproved.  I did not get a 'good faith estimate' from them in advance.  It was my first time buying a house or getting a mortgage and I didn't really even know what a good faith estimate was.  I was approved for the loan and everything seemed just fine.   I proceeded to hunt for a house and found one that I really liked and got an offer accepted.  Then when I went to sign papers to close on my home purchase the closing costs were about 100% more than expected.    I don't remember exactly but I think it was about $3,000 to $4,000 high.   I was shocked.   But then I looked at the papers I had and didn't have a solid quote on closing costs from them.   This was when I realized they were trying to rip me off.

Thankfully I stopped and decided to delay closing rather than sign the papers and go through with the mortgage.  I of course called the mortgage broker and asked what was going on.   I was first told everything was normal and these fees are nothing unusually.   Later I was told that the loan they'd approved had been mishandled.   Their manager called and tried to sell me on a different 80/20 style loan which I didn't want.   I eventually gave up as they weren't doing anything to really fix the situation.   They got a little angry at that point and told me they were sending the matter to their legal department.   I called that bluff though.   They weren't a big company and likely didn't have any kind of legal department and I doubted they even had a lawyer.  I hadn't signed anything committing myself to anything and I hadn't given them any money.  I was pretty sure they had no legal argument against me and nothing came of their threat.

Having given up on the crooked broker I now had to make a last minute scramble and get approved for another loan in order to buy the house.  Thankfully it worked out and I found a good lender that my realtor pointed me to.  The closing costs were much lower and the interest rate was fine too.  It all ended well.

I googled the name of the scam broker and there are legal notices and cease and desist orders filed online from the state about them breaking some rules.   They were fined at least once for operating under a name that wasn't filed with the state properly.   The owner of that company is in Linkedin with her last job listed as a branch manager at Countrywide mortgage.   I'm not surprised she ended up at Countrywide given their various legal problems, she would fit right in there.

Here is what I could have done better and will do in the future:

Shop around for a mortgage lender more.
Get references
Make sure you get a 'good faith estimate' up front and fully understand all fees
Don't fall for a very low interest rate and examine all the fees and points involved

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