- The Washington Times - Thursday, October 6, 2005

Q:We are in the process of refinancing my $350,000 adjustable-rate

mortgage to a fixed rate. I initially called my current lender, who offered us a 6.375 percent 30-year-fixed loan with an interest-only payment feature.

The loan officer faxed us a Good Faith Estimate, and we noticed that there were no points charged but the closing costs added up to $3,900.

We were about to set up an appointment and get the paperwork signed when a co-worker recommended we call a mortgage broker she had used in the past. The broker offered us a much better deal: 6.125 percent with no points or closing costs.

We don’t have an interest-only option, but we planned on paying down principal anyway. We made application and locked in our rate with the mortgage broker.

Now the loan officer from my current lender is faxing me a “Lock-In Agreement” for me to sign.

I had already e-mailed her that I wasn’t interested.

What are my responsibilities to her? Am I obligated to go with my current lender?

A: No. The loan officer who works for your current lender is using aggressive tactics to get your business.

The mortgage business is extremely competitive, and it’s not unusual for loan officers to engage in strong-arm behavior in order to close a deal.

The plain fact is that anyone who goes through a refinance process is never obligated to go to settlement. In fact, the law states that the homeowner has a three-day right-of-recision “cooling off” period in which he can cancel the deal within three days of signing the settlement papers if he is refinancing his primary residence.

You made the right move by not going with your current lender. Based on market rates over the last few weeks, I see that 6.375 percent is not remotely competitive, even with an interest-only payment option.

Maybe the loan officer figured you wouldn’t look elsewhere for a mortgage. At any rate, you are obligated to do nothing. Throw away the lock-in sheet and forget about it.

A 6.125 percent rate with no closing costs is a much better deal.

The fierce competition in the mortgage industry is a double-edged sword. Competition is no doubt a good thing for the consumer. It keeps prices down and encourages product innovation allowing a consumer more product choice. But there are too many mortgage consultants who use cutthroat tactics in order to generate business.

Here’s a common scenario: A loan officer discusses a mortgage plan with a prospective customer and gives a rate quote over the phone. If the deal isn’t secured, he’ll close the conversation with something like this: “If you find a better deal, call me. I have room for negotiation.”

This loan officer is certainly free to say what he wants, and the customer is certainly under no obligation to make application. But as a mortgage professional, I dislike the hard-sell tactics of some loan officers. These guys are out to sell and close a loan. Period.

Frankly, this business is too complex for a street bartering mentality. Indeed, some folks searching for the best refinance deal enjoy such bartering. And it’s perfectly within their right to do so. But folks who are not experts in the mortgage product line need a knowledgeable, honest and experienced loan officer who takes a role of an adviser rather than a salesman.

As I’ve said many times before, the best way to increase your chances of working with a lender who is able to offer competitive prices and good advice is to seek out referrals from trusted sources such as friends, family and colleagues.

The hard-sell guys don’t last in this business.

Henry Savage is president of PMC Mortgage in Alexandria. Reach him by e-mail (henrysavagepmcmortgage.com).

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