Broker Blasts Other Brokers

Tanya Higgs, who says on her Web site that she is a loan advisor and licensed broker, outlined the top 5 traps and pitfalls consumers face when shopping for mortgages in the report, Secrets of the Mortgage Industry.

“Unfortunately, for some people, their dream [of owning a home] can turn into a nightmare by going to the wrong place for a mortgage,” Higgs said in the report. “Because there is so much competition between banks, lenders, and mortgage brokers, some companies resort to underhanded methods in order to get business, or to pull business away from competitors.”

The Web site began operating last week, Higgs told MortgageDaily.com. She started the site, which aims to provide mortgage advice to consumers, after being “fed up with the tricks and underhanded methods brokers use to get business,” according to a press release Wednesday.

The guide to the “tricks” loan officers use to get business first lists “not providing a good faith estimate.” While the breakdown of how much the consumer can expect to pay for closing costs is to be given within three days of applying for a loan, many first time homebuyers are not aware of this and will not ask for it. “Some tricky loan officers will provide a good faith estimate, however, they won’t provide it until the last minute, usually a few days before closing,” Higgs wrote.

Another trick, is “not including all of the costs on the good faith estimate.” The No. 1 left out item on the good faith estimate is the broker fee. Consumers who request a no-point loan may find out at closing time that “a dishonest broker” complied by adding a point on to the closing costs, according to Higgs.

For prospective borrowers who don’t fall for the first two tricks, loan originators may practice “hiding points on the good faith estimate” by placing them within junk fees, which consumers may never question, the broker reported.

Trick No. 4 is “adding a prepayment penalty” without first consulting with the prospective borrower, Higgs said, adding that she’s “run into this trick more times than I care to count.” While an “honest” broker will ask and let consumers decide upfront if they want a penalty on the loan to lower the interest rate, some brokers will automatically include it to pocket money lenders pay them for this added feature, as it ensures a profit for bank if the borrower decides to sell or refinance quickly.

Higgs listed the top fifth trick brokers use to lure borrowers into a loan as “raising the rate at the last minute due to ‘changing rates/Fed raised rates again.'” She said she has heard stories where the consumer finds out at closing time the rate on the loan has changed due to such reasons.

In addition to providing advice, the site is a venue where consumers can apply for a loan through links provided by Google’s network of advertisers that include mortgage lenders.

Bob Armbruster, president of the National Association of Mortgage Brokers, commented that the site is her opinion and that it apparently serves as an advertisement for her. “This is one person’s opinion, and include[s] violations of the law which we would never endorse.”

Armbruster added that he did not find Higgs on NAMBs membership roll.

“She is not a member of NAMB,” he said. “Our members abide by the NAMB Code of Ethics and sign on to our Best Business Practices.”