HONEST LENDERS

Lost a nice borrower last week.  I'm a bit ticked about it.  I've always thought honesty is the best policy, but I lost a deal because of it.  When someone comes to see me about financing, I like to tell them what the maximum closing costs will be.  Until someone locks their interest rate in, rates and what I charge for fees isn't set.  Would you rather come to closing with less than you expected or have costs come in higher?

I was a bit upset about this deal because the lender at the bank told them their payment was $100 less a month and closing costs were $700 less. If we are at the same interest rate, there is no possible way the payment would be $100 less a month!!

With the new Federal Government changes, there is no way to know exactly what closing costs will be until we know who is doing everything like appraisals, and title work.  Because of these changes, we are required to estimate high, as once we give a borrower a good faith estimate we can not change the estimated fees to what the actual costs are and I end up paying the difference (note the word estimate doesn't mean crud).

Now in concept, I agree there are a lot of bad lenders and brokers out there who would lie to borrowers and quote low costs, then at closing, a borrower found out the needed hundreds, if not thousands of dollars more than the estimate.  What is now unfair to honest lenders like myself is we have to stand by the estimated costs.  Appraisals (which lenders can not order because we "influence" the appraisers) are ordered through appraisal management companies.  Because of this, appraisals can cost anywhere from $375 to $550 and we don't know what the cost will be until we get the appraisal because we can't order it or know who is doing it.  I can't put $375 because if the appraisal comes back costing $550, I personally have to pay the $175 difference.  Because of this, I will always put the maximum closing costs , and they should come in much less. 

In the instance of the loan I lost, my rate was 1/4% less, and if they had checked rates and locked with me that day, I could have offered them a credit toward closing costs of $825.  The borrowers paid 1/4% more in rate and $125 more in costs than what I could have given them based on what that lender told them.  I just wished them the best, rather than point out they would really have gotten a better deal with me.  They got screwed!  They're going to pay $27.12 a month more with the other lender, which is $325.38 a year or $9,761.45 over the life of the loan!  I'm not going to beg someone to work with me.  I only want to work with people who want to work with me and trust me.

I don't know how to express that I will give a borrower the fairest rate and costs, and that my rates are some of the most competitive around.

I hate it when lenders mislead borrowers to get a deal.  Just be sure you deal with someone who's reputable and was referred to you by someone you trust.