I closed a refinance loan in our Brooklyn office Tuesday morning. I shared a ride in with Karen M. who closes titles for my refinance loans. We had a great chat catching up on business stuff.
Karen shared some stories from closings at other mortgage companies/banks she’s attended recently.
Most disturbing is the ridiculous prevalence of the nasty Option Arm loans. This is the Negative Amortization loan where you borrow, say, $100,000 today. On your mortgage payment coupon you have two or three payment “options.” If you select the lower payment option, the interest you’re NOT paying on the mortgage that month gets tacked on to the end of the loan. If you do that every month—select the lower option—you find yourself owing $120,000 instead of the original $100,000.
Huh? Yah, apparently that’s what a lot of people are saying at the closing tables that Karen is sitting at. The borrowers are sitting there pop-eyed, blood draining from their faces, and shocked into submission as the attorney for the Lender explains how this all works.
“Well, where’s the Loan Officer who wrote the loan?” I asked Karen.
“Oh he’s never there. Loan Officers never attend closings. You’re the exception, not the rule, when it comes to attending closings.”
(Actually, at my office, ALL the L.O.’s attend their closings; it’s not a company requirement, it’s just what we do)
She went on to say how terribly she feels for these borrowers. “But he never explained that to me. I didn’t know that.” All this as the borrowers sign the loan documents. Hey, it’s a purchase loan and the downpayment is on the line. What is the borrower to do, walk out?
I’m nuts about explaining stuff. Lorraine (my wife the Realtor) giggles and chides me a bit (in a nice way) when she’s trying to show a house to our customers and I’m interrupting and pointing to things and explaining, explaining, and explaining some more.
When I write loan applications, I explain the facets of the loan programs to my clients. I need to have them understand what kind of loan I’m approving, the reasons why I selected this program, how the monthly payment is structured, what an escrow account is, why you need life insurance, and, and, and…
Yes, sometimes I ramble. But, rather that than having my clients caught like a deer in the headlights at the closing table wondering, “What the…?”