Not All Mortgage Brokers Are Created Equal

So many clients and new callers tell me that they have been led astray by mortgage brokers, that it seems to me more the rule than the exception that mortgage brokers are a problem. There are, of course, some very good ones. I have had many positive experiences working with a few who were able to help my clients refinance under very difficult circumstances. I have weeded out those who are useless. That includes the ones that don’t return calls or make obviously false promises. Many property owners have come to me telling me horror stories of some mortgage broker who promised to save them from foreclosure with a refinance and inevitably the new loan never happens. Sometimes there are valid reasons why – for example, the LTV is too high. What is troubling is that most brokers should be able to determine if someone will be able to get a new loan within a week or so. It is not that difficult to determine if a conventional or a private lender’s underwriting guidelines are satisfied. So, why do so many brokers make false promises and give homeowners the runaround for months on end?

When a mortgage is in default, time is precious. Any mortgage broker that does not act that way is abusing the homeowner. I have heard of this happening over and over and over. Many of these property owners do not fully understand the process and only after wasting months and finding themselves approaching a foreclosure sale do they come to the realization that they should file for Chapter 13 bankruptcy or just sell the property. This is not something that it takes months to determine but that is what happens with many unscrupulous mortgage brokers. They reel in the customer and say whatever it takes to try to get the business. It is a shoot first and ask questions later mentality. Homeowners need to be careful who they place their trust in. Refinancing should not take months. In foreclosure such delays cause the mortgage arrears and the bank’s legal fees to grow and mount. At some point, the owner’s equity becomes so degraded that refinancing is not viable, even with a private higher rate lender. Time is critical. Unfortunately, some mortgage brokers will only focus on getting their fee, not on what is really best. They know that if the property owner files Chapter 13 or sells, the broker won’t get paid. So other options are often not discussed, or are delayed for months. Time ticks away and suddenly the homeowner finally calls someone else for help out of frustration, wondering why the mortgage broker is no longer returning their calls or why their loan application was denied after months of false promises.

A good attorney won’t play that game. The attorney has more ethical obligations and duties and can find a way to offer several alternatives to the homeowner and work out some reasonable fee. A good attorney will tell the client right up front about the pros and cons and costs of each alternative and let the client make a quick decision, before the equity disappears and before the time runs out (ie before a foreclosure sale date). If refinancing is possible, the good attorney will find a trustworthy mortgage broker or direct lender and assist the homeowner with the process and coordinate with the present lender’s attorneys to make sure that the payoff information is obtained and that the foreclosure is discontinued after the closing.

Here is the bottom line for the homeowner – if you are not experienced with real estate issues, absolutely do not call a mortgage broker unless you have a referral or recommendation from an attorney or friend that you trust.