Banks Behaving Badly

OK, so it’s really a credit union.  Back in August of 2010, when mortgage rates were at all time lows, I decided to refinance both an investment property and what used to be my primary residence before I lost my job.  NASA Federal Credit Union was ranked A+ by the BBB.  My brother had used them, and even though they gave him grief over some nonsense and, I believe, delayed his loan, for the most part, things didn’t go too poorly.  Also, they had really good rates.  I had also looked at some online lenders with excellent rates, such as Amerisave and Aimloan, but I was convinced to stick with a local lender that was probably more reputable.

Right from the very start, I could not get any meaningful answers to my questions.  I (or my parents) had asked about the down payment requirement and the interest rate for an investment property.  I was told that there was no difference in interest rates between an investment property and a primary residence.  I don’t remember what they said about the down payment, but I believe over the course of a few months the number altered between 20% and 25%, depending on  when and who you asked.  Upon pressing them for more details later, it was revealed that investor loans really were the same interest rate, but you had to pay an extra 3 points.  In addition, they charged another .5 (I think)  points for loans less than $90,000.  The 3 points later turned out to be 1.75 points, and the .5 points mysteriously vanished altogether.  Hey, I’m not complaining about that.

Oddly they didn’t seem too interested in my business, despite the fact that I was one of those rare people out there with a job, money, a high credit score, and properties waiting to be refinanced.  I suspect now the reason is because they were already overburdened with so many larger loans.  When your margin is small, you need more volume.  And because they had low rates, it gave them a lead over the competition.  So it took some time to get any acknowledgment of my application.

When I finally did get a response, it was a complaint that they could not read my handwriting.  OK, fair enough.  I would have done it online, but they gave me PDF files.  The first piece of documentation I was sent was a loan summary for one of the properties, but most of the numbers didn’t make any sense.  It took a few days for me to receive enough documentation  to figure out what was going on.  My loan originator had swapped the amount of the loans on the two houses.  I eventually figured that out from looking at the current loan balance.  Part of the reason it was difficult to identify the problem was because the value of the property was apparently made up, or perhaps it was an estimate I supplied; it’s no longer clear.  That was at least somewhat understandable since there was no appraisal yet.

The summary also showed the origination percentage and the discount points.  The origination percentage was not at all clear.  I would later learn that they lumped a fixed fee in with origination fee, but it was not documented at that time, nor was it ever documented.    This poor habit of neither disclosing, nor documenting, as well as lumping together the various fees would later become a problem.  But at the time I had not figured out what was going on yet.  Many of the rest of the loan summary numbers were apparently made up: recordation fees, attorney’s fees, title insurance, transfer tax, etc.  I don’t have a problem with making some estimates, but if most of the numbers on a loan summary are meaningless, then why even bother providing a loan summary at all?  This would become another theme throughout the refinancing process.  The paperwork is treated as some law or regulation that stands in the way of business. They gave me the paperwork, and even though every single documented number might as well have been wrong, they seemed to be satisfied that their obligations to me were met.  The paperwork isn’t there just to make some regulator happy.  Some of us actually read this stuff.  It needs to be correct.

Next I received the rate lock and loan points agreements (one of them came with the other loan summary).  The mortgages were still swapped at this point.  Also, curiously, the dates did not add up.  The commitment period began 8/31/2010 and ended 10/15/2010, but it also said I had 60 days.  At the time I didn’t care very much about the obvious conflict, but it would later become extremely stressful not knowing when the lock expired because they were unable to process my loan in any reasonable amount of time.

At this point I started requesting that at least some of the documentation be fixed.  I wasn’t about to send two $500 checks for appraisals with the mortgage amounts still swapped.  I wasn’t angry yet; everyone makes mistakes.  But they ignored my requests to fix the problems, and so I asked again.  And again.  To be continued…

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