ONLINE MORTGAGES OR MAYBE THERE IS TRUTH TO THE OLD SAYING OF "IF IT SOUNDS TOO GOOD TO BE TRUE, IT PROBABLY IS" This is an excerpt from an article I found in an Issue of Mortgage Broker Magazine, a publication put out by the National Association of Mortgage Brokers (NAMB). The author is a mortgage trainer and used his experiences to illustrate what Lenders should NOT do. This is his story. Read it and make your own decisions.

LEARNING THE ROPES OF CYBER-BORROWING

By Gordon Schlicke
Gordon Schlicke is a mortgage trainer in Seattle, Washington
This article was written as a training example. Because it was written from an "insider's view" I have deleted the technical portions that apply only to mortgage professionals. Such deletions are noted by . . . .
Red text show notes I have added for clarity

I refinanced once last year and again this year. My wife suggested we use the Internet. After all, this is the 21st century – technology is supposed to have improved the borrowing experience. Instead, what we discovered are the goofy things that happen when a lender substitutes electronics for humans. Not that I am against progress, mind you. The graphics are dazzling and the instructions are quite clear. What bothers me is the (missing) dialogue that must take place between borrower and lender.

First of all I am definitely not a techno-guy. The most frequently used keys on my computer are "Control/Alternate/Delete." This uniquely qualifies me as a good testing source because most borrowers are in the same boat: like me, they think ".html" is an abbreviation for "hot meal." In the interest of public service. though, I pressed ahead and discovered that online lenders have taken lessons from loan servicers: You don't get to talk to a real person unless you threaten bodily harm or mention the word "lawyer."

Today, shopping online for a mortgage is much like making an airline reservation because you hear: "All our agents are busy handling other customers right now . . ." a lot. One lender took the time to look up the data on our present mortgage and make us an offer by e-mail. When I answered affirmatively, they sent another message: "The response has been so overwhelming that we are unable to handle the volume. Please try again in a few days." . . . .

I was puzzled by one lender's Web site, which covered the entire home page with their current rates but made no mention of annual percentage rates anywhere. It was my impression that the Truth-in-Lending (law) says something about this - - but I could be wrong. The Fed could have repealed the Truth In Lending Act while I was on vacation. I was so curious about the absence of annual percentage rates that I just had to inquire, so I wrote them a note. I'm still waiting for a response. I'm undeterred. I'll continue writing them because I want to find out how they got exempted from the law. I promise I'll tell you if I find out. . . . . .

The most unusual experience was a Web site with instructions to complete the complete "quick and easy" loan application form, which turned out to the FNMA 1003 (full 4 page loan application) in its entirety. I had a few minor questions before committing to this task so I made a gentle inquiry about rate and fees. I was told an online loan office "can only be assigned after the application is completed" – a good example of company policy being more important than pesky customers.

We chose an online lender who took our application by phone (an hour and 12 minutes). I'm not going to criticize the online loan officer, who sounded as if he'd been in the business 6 hours or less, but I do have a few words about disclosure: Today's online lenders don't have a good grip on government mandated disclosures. (emphasis added) Maybe their programmers skpped a few pages in the instructions. They seemed to have missed a few things the rest of us (lenders) worry about. The most common practice was to include a few (disclosures) and send the rest later. Perhaps there is no Online Lender Audit Team in Washington – yet.

When we got our "final package" there was a magic phone number to call should you have any questions. I used it. "You need to sign in front of a notary," I was told. Somehow I suspected this but was glad to have it confirmed (how else can you prove the person making the online loan application is the person they claim to be?). "Take the loan papers to any notary public, you know, like an automobile dealer. If you have any questions, they'll answer them." We did as we were told. We refinanced our house and bought a new car.

Next time we're going to go to a company that has an office with people in it.

 

This is not to say you can't find a good Lender online, many good Lenders use the Internet to make your loan process easier or as a way to give you the education and information you need to make an informed decision. BUT, there is a difference between an ONLINE LENDER and a Lender WHO IS ONLINE.

This article talks about the Lenders who are ONLY online and outlines a few of the more common pitfalls. The author didn't even begin to address some of the more blatant practices like Online Lenders being unable to close loans in the state you reside due to lack of license &/or a physical office or the rampant deceptive rate and fee practices.

Since Lenders all dip from the same "Fannie Mae & Freddie Mac money well" there are no economies of scale that can make a significant difference in rates so why get poor to nonexistant service and pay for full service?

Except for a select few, most people need the services of a real person.