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Preface: The reason for this post is due to the increased activity in mortgage applications and potential clients I have spoken with over the last two weeks, who have informed me after receiving a Personalized Mortgage Plan that they are shopping.  I cannot drive home that fact that a good Mortgage Planner will do your shopping for you! Read on..

Note to Rate Shoppers: I strongly believe that consumers and the shopping behavior are partially to blame for the credit/housing crisis. By this time you are probably thinking I am a bias Mortgage Planner, hear me out.

As a consumer myself I understand the importance of finding the best deal.  Given a mortgage is one of your largest investments, wouldn’t you agree that having a professional who specialize in lending do the leg work for you?

True, not all lenders are Mortgage Planner/Brokers, thus the benefit of working with a Mortgage Broker/Planner vs. a Bank.  The Planners fiduciary duty is to place you in the most efficient and economical mortgage.

Fact; the majority of bank loan officers are not licensed and have never taken or passed a State Licensing exam.  That would make me nervous?

Yes; competition benefits the borrower and creates the Free Market model, which I am huge advocate.

Rewind to 2004/05.
Rate shopper Mr. Durden begins his pursuit to lower his rate.  Mr. Durden’s co-worker refers him to the Planner that just closed his loan, and has nothing but the highest accolades for. Mr. Durden receives a quote on a 30 YR FIRM an excellent fair market rate, with minimal closing cost. On the way home from work he hears a commercial on the radio touting Zero closing cost, FREE appraisal….. After calling the radio lender he receives a quote that is out of this world, it’s a lower rate and a no closing cost (it is an ARM w/ a 3 YR Hard Pre Pay). It’s a low rate and no closing cost, No Brainer!  Then out of the blue Mr. Durden receives an email stating 2% rate no closing cost.  Mr. Durden definitely needs to look into this. After talking to the internet lender he now has found the best loan, a 2% (for 1 YR w/ a Hard Pre Pay and deferred interest).  Three days later the 30 Yr Fix Mortgage Planner calls to inquire on status of loan documents. Mr. Durden informs him that he has opted to go with the 2% lender; refusing to listen to what the Mortgage Planner has to say in regards to the 2% loan, insisting that he is better off going with the 2% and all the Mortgage Planner is doing is trying to give him a higher rate and higher fees. The Mortgage Planner warns Mr. Durden of the negative ramifications. Not heading the warnings he pursues the 2%. But wait radio lender calls to close and receives the same response as the Mortgage Planner. Radio lender is not going to let this one slip he offers Mr. Durden a 1% rate (3 YR Hard Pre Pay, deferred interest).  After all of the jostling with the internet and radio lender Mr. Durden secures the 1% rate.

Fast forward 3 years, the ARM is set to adjust, the pre pay is now gone, and deferred interest has added an additional $21,000 to the balance of the original loan.  Given the market had contracted and homes are not appreciating at an unheard of pace, and in some areas have decreased in value. Mr. Durden is now in nice little pigeon hole.  Not that Mr. Durden would call the lender who placed him in the loan, in his eyes it was the lenders fault and he didn’t look out for Mr. Durden’s best interest. But wait, didn’t he?  The lender did gave him the best deal at the time (or so it was sold as), and that is what Mr. Durden wanted. Even if he tried to call the lender he wouldn’t be there, he caught his rip and ran (pushed out, by the market).  Mr. Durden could call the Mortgage Planner at same number and reach him. But given his poor choices the Planner cannot help him out of his current situation.  With the adjusting rate and increase in payment with no ability to refi, “more wood for the fire”.

Why is the consumer to blame for a portion of this mess?

The U.S. homeowner was so concerned with getting the lowest rate at the lowest price, this drove lenders to act in the same fashion and in return offer products to client who didn’t understand them and didn’t want to. Consumers essentially beat down lenders until they got what they wanted.  Lenders are in business to make money, and the customer is always right.  Yes lenders carry some of the blame, and those lenders earned what was coming to them, “loss of a job”.

This short example is depicts the negativity of consumer rate shopping vs. a Mortgage Planner shopping for them.

Food for thought; you need a Root Canal you go to three different Dentist; they can all do the job.
-    One offer to do the procedure which includes a porcelain crown and lifetime guarantee, this one is the highest priced.
-    Dentist two can do the procedure; his includes a wood crown, no guarantee, second lowest in price.
-    Dentist three, he too can do the procedure, he blows the other two out of the water in cost. No guarantee, and a temporary crown and a handful of temps to back up when you lose one.
Which one would be the best for your health and dental bill for the long run?

Again if you have a professional Planner working for you, he/she will do the shopping and evaluation.

Feel Free to contact me for a Mortgage Planning Consultation.

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