(image via Wexas Travel)
“Don’t wish it were easier…Wish you were better.” – Jim Rohm
I had a conversation recently, with a client seeking a new line of credit. We are in the middle of his refinancing, combining his first mortgage with his existing line of credit (L/C). This is a common request from borrowers who want to eliminate the uncertainty of an L/C, which is usually tied to the prime rate and is basically an adjustable loan. In most cases, after combining two loans into one and getting approval, we apply for the subordination of the existing L/C, which now is paid off and has a zero balance. That means that after getting a new fixed rate loan, borrowers will still be able to tap into their equity, as long as the remaining equity is not more than 80% LTV. In the case of our client, his L/C will mature after 10 years, which is going to be next year. He wanted to be sure that he will be able to get a new L/C. When I mentioned that one of the lenders we are going to apply to is U.S. Bank, he liked that since there is a branch close to his house.
After our initial conversation, my client went on vacation to Europe. He returned with very exciting stories about Vienna, Prague, and Budapest. Then as he got back to the reality of the mortgage business, he started to complain about U.S. Bank. Before leaving for his trip, he made monthly payments on outstanding bills…or so he thought.
Somehow U.S. Bank did not receive his payment on time. While visiting Prague, he received a call from his daughter that U.S. Bank urgently asked him to contact them. He finally placed a call to discover that his monthly car payment bill for $120 was due some time ago and there were no records of payment received. The bank agreed to wait for two weeks until his return home. Upon arrival, he went to the bank, made a payment, and received another call from U.S. Bank that same day, saying they did not receive payment. Now getting irritated, (the caller was not as nice as the first one), and feeling “unjustly” accused, it turned out that it takes 24 hours for the record of payment to show up. As a result of this unpleasant experience, my client no longer likes U.S. Bank or wants anything to do with them.
How many times have you been pissed off and made a hasty decision like this one?
(image via Dr. Pinna)
I look at the situation from a different point of view: U.S. Bank did my client a huge favor and he should be very grateful. In spite of his best intentions and efforts and claims, the bank did not have records of his “original” payment. Sh*t happens. If he did not receive a call from the bank and missed the payment, this would create a 30 day late payment on his credit history; this alone could drop his credit score down 100 points. I do not have to spell out what it means for the refinancing process.
I read that 90% of airplanes use a navigation system to charter their course, yet the pilot still manually brings the plane back to reach its desired destination. The mortgage business is similar. When we receive loan documents from clients and submit them to the lender, there are many issues which seem to take over the progress of the course. Lenders have many unnecessary conditions and make errors. Appraisers mistakenly under-appraise the value of properties. Borrowers do not provide all the necessary documents on time or take vacations in the middle of the loan process. As a result, we have many reasons to complain and bitch about and we do.
In the end, we only have one destination and that is to get a good loan with a low interest rate…and we do.
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