Carolyn Warren - Mortgage Rip-offs and Money Savers: An Industry Insider Explains How to Save Thousands on Your Mortgage or Re-Finance

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Table of Contents

To Brandon Warren
because you loved me and believed in me enough
to let me quit my day job and travel to New York.

ACKNOWLEDGMENTS

To all the hardworking loan officerswhether Ive met you or not, whether you charge high prices and junk fees or notI acknowledge you as awesome salespeople who work in one of the most stressful businesses there is. Honor to all the wholesale AEs who move heaven and earth to make a deal work, and especially to Michele who taught me so much about the business.

I am indebted to Audrene who first hired me, and to Allison, who said, You can do this. And especially to my dear friend, Saundra, who is quite possibly the worlds best processor and underwriter and an extraordinary photographer. A special thank you to Rick Cashman, my first friend in New York, for helping me close loans in the East and win the Maui contest.

Thank you Dee Splater and David Sharp at Alpine Mortgage Services for letting me join your team of rock star mortgage professionals. Hugs to all my friends there: Kimberlee, Pat, Tom, Jim, Dustin, Alan, Tina and Eric, Gayle, Susan, Karen, Michelle, Brenda, Tracy, Paul, Veronica, Holly, Hannah, Katrina, Larry, Kathy, Kaulana, and Barb. And to my friends at Precision Escrow: Karen and Liesl. High fives to all my friends at First Franklin, especially to my team, Pat, Kelly, Lori, Dana, Christa, and Vu.

Much appreciation goes to my agent, John Willig, who said, I like this project right from the start and remained enthusiastic throughout; and to my editor at John Wiley & Sons, Richard Narramore, who has brilliant ideas for titles and organization. And many thanks to the entire professional team at John Wiley & Sons, Inc. Thank you Steve Harrison for hosting the National Publicity Summit in NYC.

A special acknowledgment to the brilliant minds I admire so muchwriters and businesspeople who gave me advice and encouragement : Clayton Makepeace, Bob Bly, Michael Masterson, Matt Furey; Kenneth Harney; and Brian Kurtz and Marjory Abrams.

Thank you Maggie, Gwen, and Joe for feeding Francie when I went to New York to meet my agent.

To my loving and supportive family, thank you for your prayers and for believing in me: Barbara Jean and Gus, Donald Lee, Wendy and Brian, Kimberly and Ryan, Sherrie and Dan, Bonnie and Earl, Bev and Dick, Deanne, Brieanne, Theresa, and Tina. And to my husband Brandon, who values truth above all else. May God watch over you and bless you as you pursue your own dreams and fulfill your ministries.

INTRODUCTION

Many secrets are told over lunchcasual comments, candid confessions, things that would never be said to an outsider. Little things like slipping 40 bucks to the gal who locks in interest rates. Or big things like making 40 grand off of one deal.

This particular day, I was dining with a loan officer at Michaels Broiler on the eighteenth floor overlooking Lake Washington and with a clear view of the Seattle skyline.

Forty grand. Thats amazing, I said, cutting another piece of my filet mignon. How did you do that?

The loan officer tapped his linen napkin to his lips and smiled proudly.

It was a 5/1 ARM with an interest rate of six and a quarter.

Aha, I responded. Perhaps I raised my eyebrows a tad, but nothing more. I understood perfectly. He had sold his client an adjustable-rate loan that had the interest rate of a 30-year fixed-rate loan. By selling the client a rate significantly over par, the officer was able to pocket a big back-end commission from the wholesale lender.

Did you broker out the loan? I asked this because I wanted to know if his client, the homeowner, had any idea how rich his loan officer was getting off him.

Loan officers increase their commissions by giving you a higher interest rate than par.

I did it in house, he said matter of factly.

Even better, he had a legal loophole for not revealing his windfall to the client, a windfall his client would pay for each and every month for the life of his loan. Thats the beauty of correspondent lending, he said. You dont have to disclose your YSP [yield spread premium]. He finished up his mashed potatoes and expressed his pleasure about the absence of garlic.

How long did the loan take to close? I asked.

Three weeks. And I had four other loans last month. But this month I plan to do more.

Our lunch was almost over, but I had one last question. How long have you been in the mortgage business?

Two years. Two more and I expect to retire, he boasted.

I mentally did the math and figured he was right. Four years of charging clients for secret back-end commissions that big could net a loan officer enough to quit the business and get on with perfecting his golf game.

Unfortunately, this is not an uncommon story. I know from years of personal experience that this kind of price gouging is rampant in the mortgage industry. Charging a higher interest rate than par is just one way for loan officers to collect extra pay. Most people are aware that there are also unnecessary junk fees.

Are You One of the Savvy Consumers?

Most homebuyers or people refinancing their loans know there are financial booby traps waiting, so theyre on the lookout for scams and junk fees. Nevertheless, theyre still paying way too much. On average, homebuyers are shelling out an extra $1,225 up front, and theyre taking a higher interest rate than necessary, to boot. Theyre much like the senior couple who was signing for their refinance one rainy afternoon.

As a licensed notary, my job was simply to get the papers signed properly for the loan officer. I saw that there was a $2,000 bogus discount point. (The couple wasnt getting a discounted interest rate by paying the fee.) I also noticed there was an unnecessary $395 Processing Fee. But, again, that wasnt any of my business, as a signing agent. The couple happily signed away. Then we got to the $19 Flood Certification Fee. Suddenly, the wife threw down her pen and said she wasnt going to pay that $19.

Flood certification is a requirement in the state of Washington, I explained. The mortgage company must show that the property is not in a flood zone and therefore does not need flood insurance.

She still objected, But were on a hill.

I said, I understand. Most people around here are. But its a state requirement, so theres no way around it.

Well, Im not paying it; $19 for nothing is ridiculous, she said adamantly.

I found it astonishing that she was happy to pay the unnecessary $2,000 and $395 fees and yet the $19 was a stumbling block she refused to get over.

Clearly, even people who are aware that scams and junk fees exist need to know which fees are fair and which are not. The question is, whos going to tell them?

How are you going to find out whats real, whats fair, and whats bogus when all the most important secrets are kept behind locked lips? The loan officers who are laughing all the way to the bank and slapping high-fives with one another behind your back arent going to tell you. If theyre stupid enough to take it, its their fault, one loan off icer said to me.

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