I have had a very protracted and, to my mind, completely illogical refinance application process with a mortgage broker firm. I don't see how they made a dime but the process has cost me money in lost opportunity through tighter restrictions and rising rates.
I have a 5/1 ARM with the first adjustment effective in the 6th year, which was last Nov, and annually thereafter. The rate was 5.5 plus 2.25 over LIBOR. I saw many large ads from a mortgage broker offering no cost re fi's and responded them in October. I told them that I was self employed and had been for many years, but that despite that I had a credit score over 800 and was looking to refinance with no cash out, and that the amount needed was
$195,000, but that the house was worth $550,000. I told them that I was looking for a no doc loan and asked if that could be done. They told me no problem. I asked if the advertised "no cost" part would still apply in my case. They assured me that it would. I was a little suspicious and questioned specifics such as application fees, appraisal fees, title insurance and other costs normally associated with mortgages, and again was assured definitely that they pay all the costs and did not tack them onto the loan or anything like that. I asked how they got paid for this service and their answer was that all of that came out of their commission and that they made much less money per loan than their competitors
but that because of their huge volume they could do this. They also told me that if rates came down in the future, they would refinance again with no cost. It really sounded too good to be true, but I thought with no money up front if at closing the terms had changed I would not agree as was not under the gun as it were so I would let them proceed as long as they knew this. Once again I was assured that there were no costs or gimmicks of any sort. I looked up their record on the BBB while we were talking and found that they had a complaint free record. They offered to send me some forms with the rates etc showing that
I would not be billed for costs. At their request I gave them my social security number so they could run a credit check and get the ball rolling. I was told the whole process should take two weeks but no more than three.
This story is already getting too long so in a nutshell here's basically what followed:
Countless delays, and the person initially handling my case left, their replacement also subsequently left. After many weeks I was told that all my papers had been lost so did I still want to proceed and if so I would have to submit a new application. They had sent me forms previously as a pdf which I was able to locate and send onto them. Again more delays in spite of being told no problem, everything looks great. Suddenly in May I get a phone call from an appraiser who had been instructed to come and appraise the house. He told me that he had made some initial inquiries and could not understand why he was told my house
was worth only $200 ish when all the comps showed a much higher value. He thought he had got the wrong address or something was seriously amiss. I told him that the figure this mortgage firm had given him was less than I had paid ten years ago. He told me that he would be over within an hour to appraise the property. He did so and spent about an hour measuring etc. At the end he then asked me for a check for the appraisal. I told him that I was assured that I would not have to pay for an appraisal and that he would have to take the matter up with the firm who had hired him, and that he should have told me that before he started. I called the mortgage broker the next day and was told that there is no charge for the appraisal but that there had been a change of rules since my application and that I would have to pay and it would be reimbursed at closing. I told them that as it had been six months already I will reluctantly agree to pay, but want their written confirmation as to
why this had changed and that I would be reimbursed. I must have received their written assurance as I sent them a check. The appraisal came in at $575,000. Again there were more delays. I noticed that they had run another credit report and that my score had dropped from 800 to around 780. I asked why they had run the report again aand did not get a good answer. I told them not to run any more even at no charge as each time it lowers my score. Anyway, more delays with the explanation that things had changed in the market and the mortgage companies they had submitted my app to were no longer doing
no doc loans for self employed, but that they were confident there would be no problem were I to give them tax returns and p&l stuff. I told them that this was not the deal and that I had not yet filed my last years taxes anyway and at that point had not got all the paperwork and numbers ready and had intended filing by the extension deadline in October.
I then got a notice of credit denial stating "applicant withdrew". I had received a similar one a couple of month as previously and had called and was told it was a mistake!
I then called the CEO of this firm and told him the whole story and that they either finalize the issue or refund my appraisal fee at that point and we call it quits, as I am not agreeing to the change in application terms, I am a Mom & Pop doing everything myself, and would not be getting the time to prepare financials until Aug and that is so close to my next rate adjustment I might as well wait and see. He was very apologetic about what had happend, and told me he would pull the file and get back within a couple of days. I soon received a phone call fro another person who told me that he was was the assistant to the CEO and had been assigned my case and that there appeared to be no reason why they would not be able to close within the week. In the meantime he would issue a check for the appraisal refund. Well over another month went by despite assurances that check was in the mail. I finally told him that I was ending the fiasco and to send me the check now or I would complain to the BBB. He told me that they had sent the check via FEDx overnite. Of course, it never arrived. I called back and just got more excuses, but he agreed to bring the check to my office that afternoon. Surprise! He did just that! He gave me the check and was very apologetic for the way it had all been handled and appeared to be on the brink of tears or a nervous breakdown (no I hadn't been yelling or threatening him). My wife was of the same opinion too. Normally I would have put the check with others and gone to the bank when I had time but as the check was drawn on a local bank of which there was a branch next door to me, I took it there to cash, and was told that the check was no good. I called the CEO who expressed surprise and told me that he would personally FEDEX me another check.
He said he had given his assistant the check and could not understand why the bad check I was complaining about was written on his personal account. He undertook to send me a replacement check the next day, which he did, and which cleared the bank. A few weeks following that I received another "credit denial" letter from them this time citing "unacceptable appraisal". I called the CEO back to ask why as I had terminated the proceedings and why the appraisal was suddenly unacceptable. I did not get a call back.
I did not bother calling again as I thought this was the end, at last.
I recently was billed by my existing mortgage company for responding to a request by that broker for my past payment history. It turned out that they had placed two separate requests and I was being billed $40. When I questioned it I was told that this firm had my authority to get this information. Why would they even need it even once, when they already had two separate credit reports from all three bureaux? I did not give them permission for this, but obviously cannot prove that to my existing mortgage company. They had also sent me a notice that my insurance had been amended deleting them as the lien holder and if I did not produce a policy protecting their interest then they would take a new one out at a high cost and bill me. Again, I had never given that firm permission to make changes to my policy. It turned out to be a real hassle getting it reinstated, but my insurance company had no right to make changes without my consent.
I wrote once more to the CEO of this refi firm asking for a refund of this $40 at the same time asking why a few weeks ago I had received a third credit denial from them which was dated well after I had told them that I did not wish to proceed with them, He responded that "Your file was denied because it contained fraudulent (overstated) income as verified by I.R.S form 4506(T). Unfortunately, I cannot comment further on this file."
I wrote back stating that I had never given them any income figures and that was why I had applied for a no doc in the first place and as I had filed for an October extension the IRS would not have had any figures anyway. I remember when they sent me the initial papers there was an income figure on the form which and when I questioned that and at the same time reiterated that this was meant to be a no income type loan and at that stage I truthfully did not know what my income for the preceding year would be I was told they had to put a figure down but that not to worry as based on my credit history and equity it would not make any difference. Funny as about six months later they asked me to sign an irs form allowing them access to my taxes which at first I refused on the grounds that this was meant to be a no doc loan and apart from which I had not yet even filed for taxes for the preceding year so what was the point. They agreed and I was told that it was just a formality and it would not affect the application, but that it was some new government requirement that the form be filed.
The issue here is where have they benefited from the whole process, even the reference fees charged by my current company went to that company and not to them. My initial application which they claim to have lost concerns me that the data could have been sold and used for id theft. I enrolled in a credit reporting service and so far that does not appear to have been the case. I contacted them on several occasions about this "loss" and they changed the story to that it had been shredded and no one would have had access to it. As to why it had been shredded they told me that as am employee had left it was normal practice to shred the data of clients that they had worked with.
To those of you who have had experience in refinancing their mortgage does my experience sound a little strange. To anyone within the industry what could have been the motive of this broker and where could they have profited from this kind of scenario? Should I put a credit freeze on my credit bureau accounts. or would credit monitoring achieve the same thing? I had already written to all three credit bureaus asking that the second credit enquiry be removed from the account as it was not authorized, and by score readjusted, but have got nowhere. How can I stop this broker from requesting further reports?