Online Mortgage Shopping Made Easier

Online Mortgage Shopping Made Easier

CONSUMERS who have practically made a national sport out of hunting down the best price for everything from lipstick to laptops online often fail to comparison-shop for mortgages, finding the Web sites unhelpful or difficult to navigate.

Some of the nation’s leading mortgage sites have responded by working to become more consumer-friendly. Their revamped sites, they say, will let borrowers not only browse lender rates and terms, but learn about market trends and read comments from other shoppers.

Keith T. Gumbinger, the vice president of HSH Associates, which tracks mortgage rates and provides rate quotes from lenders, says that while there is plenty of mortgage information out there, much of what has been available on the Web until recently is “broad but shallow.”

“Consumers often can’t get some of the more technically oriented stuff,” he said, citing explanations of when an adjustable-rate mortgage actually adjusts, or prepayment penalties apply.

At LendingTree, an online marketplace that connects borrowers to lenders, consumers can browse not just quotes from various lenders but also a burgeoning array of industry articles, research tools, calculators and consumer-generated ratings and reviews of lenders.

In December, according to Nicole Hall, a spokeswoman for LendingTree, the company created an online feature in which borrowers can post a mortgage-related question to be answered by a LendingTree loan specialist. “We’ve been doing a lot of development of information resources for consumers over the past year,” she said, citing the company’s growing list of how-to tips for first-time buyers and those wanting to refinance.

Quicken Loans, an online direct lender, has an expanding number of customer-written reviews — both positive and negative — on buying and refinancing. Starting in March, consumers can also download Quicken Loan’s iPhone app and track when appraisals come in, closing dates are set, and other time-sensitive hurdles in the home-buying process are reached.

Even major banks are making changes. Bank of America said it was taking a “dual path” online, offering one set of articles and tools for first-time buyers, another for the more experienced. For all borrowers, “we shoot for a ninth-grade reading level for everything we put on the Web,” said Arturo Perez, a home loans marketing executive at the bank. “We want simpler language.”

The added educational resources and customer tools arrive amid indications that buyers aren’t shopping around for loans nearly as much as they should.

A poll of more than 1,300 homeowners conducted by Harris Interactive, a market research firm, for LendingTree, and published in December, found that while 96 percent of Americans comparison-shopped for “anything,” only 61 percent said they did so for mortgages. The remaining 39 percent took out home loans based on just one quote — even though 9 in 10 of those buyers said they knew that rates varied among lenders.

Mr. Gumbinger believes that consumers, particularly first-time home buyers, simply “get freaked out” by the entire process. “There are so many choices, decisions, time pressures, things to sign,” he said. Thomas Martin, president of America’s Watchdog, a consumer advocacy group, agreed. “They are trying to educate the consumer,” he said of the online companies, “and there’s a lot of information out there, but a lot of times, it’s overkill.”

Bob Walters, the chief economist at Quicken Loans, says online mortgage companies are generally “more uniformly educational” than the bricks-and-mortar lenders. But he agrees about consumers’ propensity to feel overwhelmed — a fact acknowledged on Quicken’s Web site with a hint of levity: during the holidays, it posted instructions for turning excess paperwork into Origami.

Source:  New York Times

 

Preapproved for a Mortgage, and Then Denied

Preapproved for a Mortgage, and Then Denied

MELISSA CALDERONE was ready for a fresh start when she made plans last year to move to Florida from New Jersey. Recently remarried, she signed a contract in mid-March on a house to be built in Windermere, Fla., by Pulte Homes, the nation’s largest homebuilder. The neighborhood had good schools for her three children and two stepchildren. It was also close to where Ms. Calderone’s parents lived.

Her local bank approved her for a mortgage. But then a Pulte Homes saleswoman told her that she would get a $4,000 credit toward closing costs if she took out a loan with the homebuilder’s banking unit instead. Ms. Calderone, 38, agreed. She deposited $20,000 in earnest money and set aside $80,000 more for a down payment on the $347,000 house. Her closing date, documents show, was scheduled for late summer, about six months later.

Then her troubles began. Although she had been “preapproved” by Pulte, the company ultimately denied her the loan. Then, contending that Ms. Calderone had defaulted on the purchase agreement by failing to close on time, Pulte kept her $20,000 deposit. The house went back on the market.

“They have my money and the house, which they are selling to somebody else,” Ms. Calderone said. “I have no house and no deposit.”

Asked about Ms. Calderone’s complaint, a spokeswoman for the PulteGroup declined to comment, citing concerns over customer privacy.

But the spokeswoman provided a general statement: “Preapproval does not guarantee the final approval or closing on the transaction, since a buyer’s financial situation can change during the homebuilding process or the buyer may be unable to verify certain aspects of his or her credit profile. If the buyer fails to close on his or her financing for any of these reasons, the purchase agreement allows the seller to retain the earnest money to offset any financial damages.”

But Ms. Calderone is not the only Pulte customer with this kind of complaint. Last year, the attorney general of Arizona filed a lawsuit against Pulte, contending that the company’s mortgage sales practices deceived consumers. That suit cited borrowers who thought, as Ms. Calderone did, that they had been approved for a mortgage when, in fact, they had not been. Those people lost their deposits as well.

“In the earlier contracts there was a 60-day period for refunds,” said Nancy M. Bonnell, the assistant attorney general for Arizona who litigated the matter against Pulte. “It seemed like the disapproval of the loans came after the 60-day period. Then consumers would find out they did not qualify for the loan or rate.”

Ms. Bonnell said that Pulte customers in her case forfeited deposits ranging from $2,500 to $25,000 each.

Even when a customer notified Pulte within the specified refund period, the company did not return deposits, according to the Arizona complaint. Some customers were told they had “prequalified” for a loan at one interest rate only to be charged a much higher rate when the loan came through, the complaint said. One customer was promised a 7 percent mortgage but received one carrying a rate of almost 14 percent, it said. Knowing she could not afford the loan, that customer canceled her purchase; Pulte refused to refund her deposit, the complaint said.

Pulte settled with the Arizona attorney general last August, without admitting or denying wrongdoing, Pulte agreed to pay $1.18 million, including restitution.

Under the terms of her contract with Pulte, Ms. Calderone had 45 days to cancel her purchase and get her deposit back. But as occurred in Arizona, her problems with Pulte Mortgage — indeed her first contact with the loan-processing unit — did not come until well after that period had ended.

E-mail correspondence between Ms. Calderone and Pulte shows that the lending company did not contact her until May 25, 2010 — some 67 days after she signed her contract. At that point, she began supplying documents, like the terms of her child-support agreement with her ex-husband, which was her only source of income.

Over the next three months, she continued to respond to questions and requests from Pulte, even when it asked for materials she had already submitted. Pulte also asked about small transactions in her bank account. Where did a $500 cash deposit come from, Pulte wondered? A wedding gift, Ms. Calderone replied.

AS the summer passed, Ms. Calderone kept supplying documents. But she was growing worried that she would be unable to move into the Windermere house by the Sept. 9 closing date. She was living with her parents, and a delay would mean her children could not attend the Windermere schools, where she had registered them.

During this back and forth, nothing changed in Ms. Calderone’s financial situation. At one point, the Pulte loan processor told Ms. Calderone that questions were arising because of new rules imposed by Fannie Mae and Freddie Mac, the mortgage finance giants. “Then she comes back to me saying ‘You haven’t been divorced for a year yet, so we can’t verify how much income you are getting every month,’ ” Ms. Calderone recalled.

It seemed to her like one big runaround. “I had the income; I had the credit score,” she said. “They preapproved me, and I had a closing date. To me, is seemed like they were looking for a reason not to complete the deal.”

The closing date came and went with no contact from Pulte, Ms. Calderone said. The extension she had received from the local school district, meanwhile, was set to expire on Sept. 23.

On Sept. 13, she received an e-mail from a Pulte representative saying the company was submitting her loan application to its regional underwriting manager for review. “I should know today,” the e-mail concluded.

But Ms. Calderone did not hear about her loan that day. About a week later, she received a phone call saying the loan had been denied. Unsure if her children would be able to stay in the local school, she canceled her contract and asked for her money back. She was told that because she had failed to live up to her end of the deal, Pulte would keep her $20,000.

In early December, after she wrote a letter complaining to Pulte’s chief executive, the company offered her a $10,000 credit on the purchase of another Pulte home. She declined. She and her family are now renting a home in south Florida.

A version of this article appeared in print on February 6, 2011, on page

 

 

 

 

 

Five Beloved Myths of the Mortgage Market

Five Beloved Myths of the Mortgage Market

America’s mortgage market almost sank the world economy. But rather than rushing to fix it, the government has blown two deadlines for proposals. The ideas are finally due as early as this week from the Treasury, and those recommendations will frame the debate. But the danger is they will be based on dogma that should in fact be seriously questioned.

Proposals have been circulating ever since the previous administration seized Fannie Mae and Freddie Mac in 2008. Most agree that both entities should be wound down, one way or another. But whether government should still have a role subsidizing housing finance is still up for grabs — or rather, few seem able to resist the idea that it should, even if it is a smaller one. The trouble is that financial types have become accustomed to a government safety net, and few of the constituencies involved are willing to challenge America’s core housing myths.

MYTH 1 Significant reform will kill the housing market. Many fear any major overhaul of housing finance will slam a still tottering housing market.

THE REALITY If America scraps its current system tomorrow, that’s what will happen. At a minimum, removing the government subsidy should nudge mortgage interest rates higher, potentially knocking home prices down further. But Britain took more than a decade to phase out tax deductions on mortgage interest. Homeowners, would-be homeowners and mortgage lenders can adapt to even a potentially wrenching change if there’s a five- or 10-year transition period. The United States needs to get started on a plan.

MYTH 2 The American mortgage market is too big for the private sector to handle alone.

THE REALITY The $10.6 trillion mortgage market is huge, and Fannie and Freddie own or guarantee roughly half of it. But the size of the market — and the secondary market in securitized mortgages, and so on — was part of the problem in the years leading up to the 2008 crisis. The market is already down from its $11 trillion peak, but it is still nearly twice as big as in 2001. With the national average home price down more than 30 percent from its highs and millions of homeowners in danger of foreclosure, it’s clear only a smaller mortgage market is really sustainable.

Fully private-sector mortgages would be more expensive, but at the right price banks will lend. Studies conducted before the financial crisis suggested that government backing saved homeowners only 0.15 to 0.4 percentage point on their mortgage interest rates.

MYTH 3 Investors would stop buying mortgage bonds without government guarantees. Bill Gross, bond guru and co-head of Pimco, certainly has said he wouldn’t want to buy mortgages. Mr. Gross and others in his industry have grown used to the government guarantee. It reduces volatility and saves them some time-consuming analysis.

THE REALITY There are plenty of deep-pocketed investors looking for good investments and with the capacity to figure out their value. Again, interest rates would have to be a bit higher, and the securitization market would probably be a good bit smaller. But what existed before the crisis was unsustainable.

MYTH 4 The 30-year fixed-rate mortgage is part of the American dream.

THE REALITY It’s true that the current standard American mortgage — one with a relatively low rate of interest fixed for 30 years that can be refinanced at almost no cost — would probably be harder to get. Yet high home ownership rates in other countries prove this structure isn’t necessary to enable people to buy homes. A longish transition period would allow mortgage borrowers to get used to less generous home financing. And that’s preferable to having them pay much more down the line through their tax bills if investors need bailing out.

MYTH 5 Government subsidies promote homeownership.

THE REALITY This doesn’t seem to be the case at all. Homeownership rates in the United States from 1998 to 2008 averaged 67.8 percent, just ninth highest out of 17 developed nations, according to a study from the University of California, Berkeley. Moreover, the study found that American homeowners paid significantly higher mortgage rates, roughly 1.5 percentage points more, than those in Europe. That means that even if homeownership is a worthy policy goal, subsidizing mortgages is not the way to do it.

Source:  New York Times ~ February 7, 2011