Are all mortgage lenders monsters?
January 1, 2021 9:37 PM Subscribe
I'm looking into refinancing and the first hit our broker got us was a great deal, but I researched the company and they are just terrible. But, I am wondering if I'm going to find any mortgage company that isn't terrible?
My previous mortgage was with Wells Fargo, and though personally my experience was great, we all read the newspaper.
So I switched to a co-op and that's been a logistical nightmare and I would never do that again - though a friendly bank, they are not set up to service mortgages and have made several substantive errors.
So I sought out a mortgage broker this time around and she found us a sweet deal, and then I googled the company and the reviews were all one star. I know many people don't like their mortgage companies for many reasons, and of course, angry customers are more likely to post 1 star reviews. But it was all 1 star reviews from multiple different consumer websites. Then I found that there was a judgement on them for several million dollars for their lending practices with minority borrowers.
We walked away from that lender, but then I was wondering - will we be able to find any lender that can both service loans professionally and not do illegal things or is the lending business just like this?
My previous mortgage was with Wells Fargo, and though personally my experience was great, we all read the newspaper.
So I switched to a co-op and that's been a logistical nightmare and I would never do that again - though a friendly bank, they are not set up to service mortgages and have made several substantive errors.
So I sought out a mortgage broker this time around and she found us a sweet deal, and then I googled the company and the reviews were all one star. I know many people don't like their mortgage companies for many reasons, and of course, angry customers are more likely to post 1 star reviews. But it was all 1 star reviews from multiple different consumer websites. Then I found that there was a judgement on them for several million dollars for their lending practices with minority borrowers.
We walked away from that lender, but then I was wondering - will we be able to find any lender that can both service loans professionally and not do illegal things or is the lending business just like this?
Like SquidLips said, you need to differentiate the loan originator and the loan servicer. They could both be bad, both be ethical or one of the other could be crap. You have some control over who originates the loan especially if you are willing to pay a (slightly) higher rate. If you use a broker, it is harder to communicate with the originator, but you could ask for a commitment for the lender to not sell your loan for x number of months/years. Until my son got a VA loan, I never saw, nor considered asking for that sort of no sell commitment.
I had WFC, like you, for one of my loans. They never screwed me over so I did not pursue another lender. If your primary concern is an ethical lender over price, I am sure they are out there just as I am sure that every lender has had some issues at one time or another.
If there is a local bank that serves the local community and you think they are ethical, I would move my banking relationship to them and get my mortgage through them. It keeps the money in the community.
There are definitely smaller community banks that are accountable to the community in which they reside. Often, they are either not as competitive with the terms/rates or they cannot afford to service all the loans because it ties up too much capital so they sell the loans, make the fee and move on. That to me is ok, if they make the next loan to someone in the community.
It is not as simple as depicted in It's A Wonderful Life, but George Bailey was right when he explained to his neighbors who came for the run on the bank that their savings were tied up in the community houses. With a WFC or BofA, they are so large that they can mitigate risk but also have no accountability to any one community.
posted by AugustWest at 10:10 PM on January 1, 2021
I had WFC, like you, for one of my loans. They never screwed me over so I did not pursue another lender. If your primary concern is an ethical lender over price, I am sure they are out there just as I am sure that every lender has had some issues at one time or another.
If there is a local bank that serves the local community and you think they are ethical, I would move my banking relationship to them and get my mortgage through them. It keeps the money in the community.
There are definitely smaller community banks that are accountable to the community in which they reside. Often, they are either not as competitive with the terms/rates or they cannot afford to service all the loans because it ties up too much capital so they sell the loans, make the fee and move on. That to me is ok, if they make the next loan to someone in the community.
It is not as simple as depicted in It's A Wonderful Life, but George Bailey was right when he explained to his neighbors who came for the run on the bank that their savings were tied up in the community houses. With a WFC or BofA, they are so large that they can mitigate risk but also have no accountability to any one community.
posted by AugustWest at 10:10 PM on January 1, 2021
You will have to decide how much this is worth to you and what sort of "terrible" you're willing to put up with.
Assume 100% of mortgage brokers, the vast majority of co-ops and credit unions, and the majority of large institutional banks sell their mortgages. They'll want to do so immediately - not within a year, but within a couple months - because that's how they get cashflow to issue more mortgages. You will not be able to choose your mortgage servicer at any company that sells their loans. If a company sells their loans, they are required to disclose so on your "good faith estimate" (GFE) disclosure. I've only once seen that box not be checked.
You will have to accept a (significantly) larger interest rate to avoid your loan being sold. Holding a loan is a significant expense to the loan originator - that's why the government has Fannie Mae and Freddie Mac. For what it's worth, for the single loan I've had that was not resold, I paid roughly 1.5 points (1.5% of the amount lent, as a fee to the lender for the loan) and an interest penalty of ~0.25% compared to competitive offerings. I thought it'd be worth it to me, but in the end, the service I got from that bank was exactly the same as any others [*] - they took my money at a regular cadence and sent me mortgage statements. I quickly recognized the error of my ways and refinanced at zero cost and saved 0.675% of mortgage interest.
If you don't want to deal with that particular lender, fine - there are a whole bunch else on the market - just be very skeptical of any claim that a particular lender will be more or less "professional" than any other. They all sell their loans to Fannie Mae and Freddie Mac, who in turn randomly select a servicer for the resold loan. It's how the business works.
[*] to be fair, they did reimbursement for my wire transfer fee - a whopping $20.
posted by saeculorum at 10:52 PM on January 1, 2021 [4 favorites]
Assume 100% of mortgage brokers, the vast majority of co-ops and credit unions, and the majority of large institutional banks sell their mortgages. They'll want to do so immediately - not within a year, but within a couple months - because that's how they get cashflow to issue more mortgages. You will not be able to choose your mortgage servicer at any company that sells their loans. If a company sells their loans, they are required to disclose so on your "good faith estimate" (GFE) disclosure. I've only once seen that box not be checked.
You will have to accept a (significantly) larger interest rate to avoid your loan being sold. Holding a loan is a significant expense to the loan originator - that's why the government has Fannie Mae and Freddie Mac. For what it's worth, for the single loan I've had that was not resold, I paid roughly 1.5 points (1.5% of the amount lent, as a fee to the lender for the loan) and an interest penalty of ~0.25% compared to competitive offerings. I thought it'd be worth it to me, but in the end, the service I got from that bank was exactly the same as any others [*] - they took my money at a regular cadence and sent me mortgage statements. I quickly recognized the error of my ways and refinanced at zero cost and saved 0.675% of mortgage interest.
If you don't want to deal with that particular lender, fine - there are a whole bunch else on the market - just be very skeptical of any claim that a particular lender will be more or less "professional" than any other. They all sell their loans to Fannie Mae and Freddie Mac, who in turn randomly select a servicer for the resold loan. It's how the business works.
[*] to be fair, they did reimbursement for my wire transfer fee - a whopping $20.
posted by saeculorum at 10:52 PM on January 1, 2021 [4 favorites]
When we refinanced it was important to me that our mortgage not be sold. Local credit union that everyone raves about sells their mortgages, but the local bank that we’ve had accounts at for 30 years doesn’t and they had very competitive rates. Better than we were getting from a larger, national bank.
Based on this I would recommend asking locally if anyone has a local bank that they love.
posted by MadMadam at 12:38 AM on January 2, 2021 [1 favorite]
Based on this I would recommend asking locally if anyone has a local bank that they love.
posted by MadMadam at 12:38 AM on January 2, 2021 [1 favorite]
Yeah I had a mortgage through whoever my broker got it from, which got sold first to Citibank and then to a mortgage-only company that had the worst website I've ever been forced to work with. My current one, though, is through a local, non-credit-union bank and the experience has been totally fine and they don't show any signs of wanting to sell it.
posted by restless_nomad at 5:19 AM on January 2, 2021
posted by restless_nomad at 5:19 AM on January 2, 2021
We had a horrendous experience with our first mortgage lender. The broker was great, but they don't hold loans, only sell them on, and it got sold on multiple times in the first few months. We couldn't figure out whom to pay, and the company who ended up with it (Dovenmuehle) was the worst. Over five months or so, and repeated calls to customer service, our online account never got the bugs worked out of it enough for us to be able to use it, so we had no idea what our updated balances were, whether they were fleecing us, etc. It was almost impossible to get to speak with a human, they always lost the notes from the previous conversation, and it was just a nightmare.
Partly to take advantage of lower interest rates and partly to get out from under our lender, we refinanced over the summer. When I researched financial institutions with which we might want to refinance, I specifically asked whether each would hold the loan or sell it on. Most sold it on. Only a few local credit unions actually held the loan. Fortunately for us, one of the best rates came from one of those local credit unions which also promised to hold the loan. It's been such a good experience. I'm able to speak with someone immediately whenever I have questions, they're always knowledgeable about my loan and able to give good answers, and we can go in person to speak to them if we want. The whole process has been smooth and wonderful.
Based on this, I would strongly recommend calling around to banks and credit unions to ask not only what their rates are but whether they hold or at least service the loans themselves. I called 40 places (national banks, and banks and credit unions within a 2-hour vicinity of our house). It took a couple of days, but it was well worth it. My life is at least 25% better not having to deal with our previous mortgage servicer. From researching online, most mortgage servicers seem terrible, and since you can't choose your servicer, it's just not a gamble worth taking. Also, at least in our situation, the best rates came from local credit unions (presumably because they're not paying money to advertise). We got a 10-year mortgage at 2.375% with only $200 total fees instead of over $2000 (origination, title search, everything else).
posted by ClaireBear at 10:07 AM on January 2, 2021 [3 favorites]
Partly to take advantage of lower interest rates and partly to get out from under our lender, we refinanced over the summer. When I researched financial institutions with which we might want to refinance, I specifically asked whether each would hold the loan or sell it on. Most sold it on. Only a few local credit unions actually held the loan. Fortunately for us, one of the best rates came from one of those local credit unions which also promised to hold the loan. It's been such a good experience. I'm able to speak with someone immediately whenever I have questions, they're always knowledgeable about my loan and able to give good answers, and we can go in person to speak to them if we want. The whole process has been smooth and wonderful.
Based on this, I would strongly recommend calling around to banks and credit unions to ask not only what their rates are but whether they hold or at least service the loans themselves. I called 40 places (national banks, and banks and credit unions within a 2-hour vicinity of our house). It took a couple of days, but it was well worth it. My life is at least 25% better not having to deal with our previous mortgage servicer. From researching online, most mortgage servicers seem terrible, and since you can't choose your servicer, it's just not a gamble worth taking. Also, at least in our situation, the best rates came from local credit unions (presumably because they're not paying money to advertise). We got a 10-year mortgage at 2.375% with only $200 total fees instead of over $2000 (origination, title search, everything else).
posted by ClaireBear at 10:07 AM on January 2, 2021 [3 favorites]
Dovenmuhle is the worst. When we changed our homeowner's insurance policy and had to update with Dovenmuhle, it took multiple phone calls, letters, and finally certified letters to get them to change our insurer in their system. They just couldn't seem to get it together to make such a simple change. A real headache, and their phone system is awful, like 30 minutes on hold every time I had to call.
We pay a combined monthly insurance/mortgage payment to our servicer, who forwards the insurance portion to our insurer. (This insures the mortgage servicer that the property is insured and that they won't lose their money if our house burns down. This is usually a requirement.) Fortunately, Dovenmuhle sold our mortgage and we have a new servicer. Our mortgage is about 15 years old, and this is the 4th time, I think, that our mortgage has been sold. Unfortunately, you can't choose if or to whom your mortgage is sold. If this is important to you, a local bank is probably a better choice, but I don't think there is ever a guarantee.
posted by citygirl at 4:10 PM on January 2, 2021 [1 favorite]
We pay a combined monthly insurance/mortgage payment to our servicer, who forwards the insurance portion to our insurer. (This insures the mortgage servicer that the property is insured and that they won't lose their money if our house burns down. This is usually a requirement.) Fortunately, Dovenmuhle sold our mortgage and we have a new servicer. Our mortgage is about 15 years old, and this is the 4th time, I think, that our mortgage has been sold. Unfortunately, you can't choose if or to whom your mortgage is sold. If this is important to you, a local bank is probably a better choice, but I don't think there is ever a guarantee.
posted by citygirl at 4:10 PM on January 2, 2021 [1 favorite]
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It'll result in getting hammered with phone calls and e-mails, but if you're ok with that, websites like LendingTree will provide you a number of different options and offers, and you can then research the reviews and history of those lenders to find one you're comfortable with. Once you choose, if you at least follow up with each of them to let them know you're no longer in the market they're usually pretty good at stopping the communication, though I would use a throwaway e-mail anyway if you go this route. (I did something similar but for a new car purchase this year and don't have any residual spam from it after the follow-ups.)
One thing to keep in mind is that regardless of who you go through, unless they can tell you otherwise up front, there's a good chance the lender will sell your mortgage off in a year or two to some other random company anyway that you don't have a choice about, so be prepared for that.
posted by SquidLips at 9:55 PM on January 1, 2021 [5 favorites]