Posted by: Peter Coy on July 25, 2006
Here’s an interesting complaint about E-Loan from “VelocityDC,” followed by a reasonable response to the complaint that I solicited from the company. Hot Property doesn’t make a practice of investigating readers’ complaints, but this one seemed worth checking out.
THE COMPLAINT …
I need to lock in a rate in the next week for a house in Silver Spring and have been shocked by how much the rates change from one day to the next. Besides the most recent interest rate hike by the Fed, what other factors affect the interest rate? Unemployment rates? Oil prices? COnflict in the Middle East?
For the real mortgage rate hawks out there: what are some general tips for trying to get the best rates? Are rates generally lower in the morning or afternoon or does it matter at all? (I'm not the day-trading type, but since I'm going to be stuck with this rate for some time, I'd like to shave as much off the rate as possible.)
I'm also a little perturbed by the loan officer from E-Loan who called me on Friday to tell me ostensibly that she got an email from her boss saying that rates are lower than they have been in months, and encouraging me to lock in that day. That didn't make sense to me then, and now I see that Freddie Mac is reporting that rates on a 30-year fixed are the highest they've been since 2002. Is this fraud? Should I drop ELoan now?
Thanks for any advice.
... AND THE RESPONSE
Again, thank you for bringing this to our attention.
I talked with our SVP of first mortgages. He feels that this sounds like a very common occurrence of a consumer being confused by the complexity of the various pieces of information out there that can factor into consumer lending rates. Specifically, what the Loan Consultant was referring to was the fact that the 10-year treasury benchmark had dropped in the previous couple of days to its lowest in 4 months. However, your writer is comparing this to the Freddie Mac rate which is a backward logging rate – always looking back about a week or so whereas most lenders tend to move with the market. In other words, the writer was not comparing apples to apples. Unfortunately, it seems that consumers are often misled – or tend to misunderstand – the relationship to mortgage rates of these Freddie Mac announcements.
And, I thought I’d take the liberty of providing a couple of tips that might help him and other borrowers make the best loan decision:
It’s usually best to lock in a rate in the morning since most lenders tend to increase their margins at the end of the day and put out their best price in the morning to encourage applications and locks.
As with any decision, it pays to be the informed consumer. Feel free to ask as many questions as necessary to be sure you understand what you’re getting – and what you’re NOT getting. As with the above situation, a consumer should feel perfectly comfortable asking to be convinced that this is the case – ask to understand how this compares with what you might be hearing about Freddie Mac’s rate.
Compare, compare, compare – as with any purchase, be sure to seek out more than one price or offer. Even if you know you’re going to use your local lender or broker, take full advantage of the internet and compare rates, fees, potential overages. Keep in mind that you can’t just compare rates – most lenders will lure you on rate only to surprise you with hefty fees at the closing. Demand a listing of all fees before agreeing to lock. ...
BusinessWeek editors Chris Palmeri, Prashant Gopal and Peter Coy chronicle the highs and lows of the housing and mortgage markets on their Hot Property blog. In print and online, the Hot Property team first wrote about the potential downside of lenders pushing riskier, "option ARM" mortgages and the rise in mortgage fraud back in 2005—well ahead of many other media outlets. In 2008, Hot Property bloggers finished #1 in a ranking of the world's top 100 "most powerful property people" by the British real estate website Global edge. Hot Property was named among the 25 most influential real estate blogs of 2007 by Inman News.