Mortgage Broker 101: Better Know Who Is Handling Your Mortgage Refinance

Here’s a true story, no scratch that, a factual warning about a mortgage industry “bad apple” out there, calling himself a mortgage broker. If you are considering any mortgage transaction, please read this article.

The Situation:
One of our website visitors recently submitted a question about her specific mortgage situation. For privacy reasons, I won’t share her real name, so let’s just call her Sarah. 

Something wasn’t “sitting right” with Sarah about a refinance deal she was putting together with her then mortgage broker. So Sarah wisely decided to get a second opinion about how her current mortgage broker was structuring her refinance deal.

Sarah mentioned that this particular mortgage broker had set up an insurance premium on the deal of nearly 24K plus was charging her an additional $1500 broker fee. Sarah asked me if I thought she was being – in her words - “screwed” and I said – “with out a doubt – yes”!

Sarah then asked me to take a closer look at her refinance deal. 

The result:
We ended up re-doing the deal and Sarah’s insurance premium dropped to 10K ($14,000 savings) and with no broker fee. Yes $10,000 with zero broker fee!  Sarah, now my client, ended up saving over $15,000, when all was said and done. Of course, she was thrilled with her new deal and so we proceeded to close the deal, like we’ve done with so many other clients in the past.

Now here comes the part about the warning:

Shortly after, when Sarah was at her lawyer’s office to sign the closing documents, Sarah discovered that her previous mortgage broker had unexpectedly placed a “lien” against her property for his fees. Unbelievable!

The truth is, people change banks, and mortgage brokers all the time in order to get the best rates and situation for them. It’s common practice. And with a savings of $15,000, who wouldn’t change brokers for the kind of savings we got for Sarah?   But, this mortgage broker knew exactly what to do if he lost a deal, and basically decided to “stick-it” to Sarah.

So now, at that point, Sarah had only 2 choices, don’t pay and don’t do the deal, or pay and get the refinance done. My client elected to pay and get the deal done.

But, it gets worse!

The other mortgage broker agreed on the arrangement but along with payment, wanted a letter stating no legal action will be taken against him in the future. Talk about wanting to have your cake and eat it too!

Now, please understand, that this is an extreme situation, and in all of my years as a mortgage consultant, I have never seen anything this bad!   And, people can and do switch mortgage brokers with little or no problems the vast majority of time.  But, there are a few bad apples out there! 

So the morale of the story, is take your time when choosing a mortgage broker or consultant when considering refinancing. Much of Sarah’s situation could have been avoided by doing the necessary due diligence on this mortgage broker.  She may have discovered a few red flags that could have saved her thousands of dollars.

I’ve written a number of articles on how to choose a mortgage broker etc.  Why not take a few minutes to read through them.  I’ve posted them just below.

And if you have any questions about the deal your mortgage broker has put together for you, please don’t hesitate to use the form at the top to contact me.  I’d be happy to help.
 
A Happy Ending For Sarah?

Somewhat… because in the end, even with the nightmare she went through with her past mortgage broker, the new deal we put together for Sarah allowed her to still save more money in the long run, than the old refinance deal, even with the unnecessary costs she paid.

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Need to unlock your home's equity - but have a few questions? Why not consider a free private email consultation with me, Darrin Roseborsky? There's no obligation or commitments to worry about. Just helpful answers to your questions. Use the short form in the top-right corner to get started. And in a few minutes, you'll have the answers to all of your questions.