Smart homebuyers work with lenders who keep their loans
For many homebuyers, the loan closing is one of the happiest days of their life. All of the planning, searching, negotiating, moving and expense that goes into acquiring a new home culminates in a fairly brief but joyful ceremony at the title insurance company. When your loan closing is over, you exchange hugs and “high-fives” with your realtor, pose for a picture or two and then head home to begin an exciting new chapter in your life.
But only days later, while you’re unpacking and moving into your new digs, you unexpectedly receive a letter from a mortgage servicing company located far, far away announcing that they’ve acquired your home loan and that you’re their new customer. It all sounds familiar, but barely. The letter tells you how to make your monthly payments and comes complete with instructions that contain lots of toll-free numbers, P.O. boxes and confusing mortgage terms.
Suddenly, it all sinks in. The working relationship you formed with your loan officer is gone forever and your realtor is no longer there to help you. You’ve been “sold”.
Believe me, you’re not alone. According to the Mortgage Bankers Association, almost 75% of all homebuyers had their loan sold to a mortgage servicer in 2017. And that’s just the beginning. The practice is so commonplace that many homebuyers will have their loan sold two or three times during their lifetime.
Mortgage brokers, as opposed to mortgage lenders who will close your loan and then service your loan, are famous for adding on thousands in loan fees and then immediately selling your loan to a mortgage servicer. In theory, having your loan sold seems relatively harmless but in practice it can really invite trouble. As the cost of servicing a home loan has increased, mortgage servicers have acquired more and more home loans while trying to reduce their overhead at the same time. As a result, they’ve installed more automated recordings (anyone like talking to a robot?) and voice mail. They’ve made it much more difficult to talk to a real person to help solve your problem and it can take a lot longer to do so.
Despite the recent efforts by the Consumer Finance Protection Bureau (CFPB) to regulate the mortgage servicing industry, many problems still remain. The CFPB’s consumer complaint database is full of horror stories about botched property tax payments, insurance claim problems and payment processing errors.
But it doesn’t have to be that way.
Choose a lender who services their own loans.
It’s a simple question you can ask any loan officer, “Will you service my loan? Are you a mortgage lender or a mortgage broker?” By choosing a lender who also services their loans, you’ll enjoy better service. After all, a lender who helped you buy your first home would like nothing better than to get your “repeat business”. Sadly, a lot of large mortgage servicers don’t originate loans so trying to get them to refinance your home loan is like pulling teeth.
Chances are that sometime during the life of your loan, you’ll need to contact your mortgage company to help answer an important question or address some sort of problem. When you do, you want that process to be as stress-free as possible. At some point, the chances are also pretty good that you’ll want to consider refinancing as well. Take our advice and be a smart homebuyer—don’t settle for a mortgage broker who will sell your loan to a large mortgage servicer or a large megabank. Choose a lender that truly wants your future business and is willing to give you the customer service you deserve.