Bait and Switch (long) - Posted by Richard (NC)

Posted by TomC (MD) on January 10, 2001 at 12:56:08:

I only know of one - USAA promises to never sell your loan.

But they don’t do NOO loans!


Bait and Switch (long) - Posted by Richard (NC)

Posted by Richard (NC) on January 09, 2001 at 19:58:25:

I recently applied for a mortgage on an investment property using Lendingtree. Because my credit is good I received several good offers for a mortgage on an investment property with 10% down.

Well I decided to go with one offer that was quoted at 7.375 percent no points. Everything was fine, I received the commitment letter and was all ready to go.

I received a call from the broker stating that he had just talked to the lender and could not do the mortgage at those terms. Lender said that they had to do an investor loan at 6.75% with 2.5 points. Broker said that he tried to get the mortgage under a second home program but because the house is on the same block/street as my primary residence the second home program was a no go. It must be an investor loan which is what I asked for in the first place.

Since this is my first time dealing with a broker, I’m not sure that he tried to do a bait and switch or the lender offered better fees to the broker on the new terms on the new loan and that’s why I can’t get the loan at the original terms.

What do you guys think? I have a commitment letter from the lender with the original terms, should I push the issue or pay the points upfront and enjoy a larger positive cash flow on the rental? (Payments will be $50 lower per month…) Have you ever encountered this before?


Richard (NC)

Re: Bait and Switch - Posted by Frank Chin

Posted by Frank Chin on January 10, 2001 at 12:08:09:

I had a somewhat similar situation at a refinancing with a mortgage company some years back.

I applied for and received approval, committment letter for a NOO mortgage. Went to closing and all the paper work was for a second home mortgage.

My attorney is one of those who wants to collect his fee do no work. Kept saying its no big deal. However my wife started yelling and hollering. Finally the head man came down and asked to see what the mortgage application looked like. Since it was for a NOO mortgage, and apporoved as such, that’s what we got.

His point was we didn’t lie on the application.

I should have kept a closer eye on these crooks. I accidentally found out they’ve been consistently late payng the real estate taxes - going back several years. The town told me late fees of over $500 late fees were paid each year.

I went back to them and asked for a printout of escrow re-imbursements for the last three years. They countered by saying it’ll take a few weeks and it’ll cost you $25.00 per printout. I said - no problem, here’s the $75.00 and get it to me.

The long and short of it was I got re-imbursed one year and before I was able to get after them on the others, the portflio was sold to a larger bank.

Re: Bait and Switch (long) update - Posted by Richard (NC)

Posted by Richard (NC) on January 10, 2001 at 12:00:34:

I decided to challenge the broker because I think he was playing games and I haven’t spent any money yet. Oh how the story changed!!!

Here are my options:

Loan amount: $108,900

6.75% with 2.5 points
6.875% with 2 points
7% with 1.5 points
7.125% with 1 point
7.25% with .5 of a point
7.375% 0 points

Now I’m considering dropping the broker. He is playing games. Any option I pick will result in a min. positive cash flow of $400 per month as a rental.

If the name of the game is getting control of property with a min amount of money, should I go for the 0 points?

Richard (NC)

Re: Bait and Switch (long) - Posted by dewCO

Posted by dewCO on January 10, 2001 at 11:47:16:

Lender commitment letters don’t mean squat, as you have found out. First I would never do a loan over the internet. (You can’t find these guys when you need them, especially if you need to go and scream at them!!!LOL) I would check with lenders in your area, preferrably one or two recommneded by a good RE agent in your area, and shop this loan to see if this second story is the real one for you!!!

PS most loans now days are going to be brokered out and sold to place else, unless you are maybe dealing with a local bank or some such. And don’t know that anyone can promise you that it will never be sold, even if they keep it at the start.

Re: Bait and Switch (long) - Posted by Dave (NY)

Posted by Dave (NY) on January 10, 2001 at 11:08:28:


I went through a very similar situation recently dealing with a mortgage broker. At the closing we were told of changes in the terms by the lender’s attorney. We had our commitment letter in hand from the broker which was obviously different from the lenders terms. This may not be possible in your case but we took a walkaway position. We said no deal unless you can meet the original terms and we walked out of the closing. There were a lot of upset people, but within a week the bank agreed to our terms. Exactly one week later we closed.

What to do - Posted by Paul_MA

Posted by Paul_MA on January 09, 2001 at 22:11:33:

Hi Richard

The mortgage brokers I encounter did not give commitment letters. Instead, they gave good faith estimates and would not lock in until the closing.

Using mortgage brokers can be quite frustrating. I made some costly mistakes before my loan closed. Here are some pointers SINCE you are using mortgage brokers:

  1. Pay no application fees upfront. If it is required, drop em.

  2. Get an appraisal in your own name. Call appraisers in your area and find out which ones have national certification. Use them. Tell the mortgage brokers that the first lender you were working with, ordered an appraisal that you paid for, and then changed the terms of the loan. Now you have no appraisal. If this already happened to you, the lender MAY recertify the appraisal back to you. You can recertify an appraisal in your own name to a mortgage lender.

  3. Get the title work ready. An attorney or title company handles this.

  4. Get about 3 or 4 mortgage broker bids. Its more likely than not that some of them will change the terms before the closing, need excessive information or just drop out completely.