Who do you turn to when you want to file complaint on mortgage? In this informative interview, Darius Mirshahzadeh, co-founder and CEO of 62Plus and mortgage expert, reveals when a complaint is merited and what the proper channels are to follow.
What are some common reasons for mortgage loan applicants to file complaints?
Generally, a mortgage loan applicant will file a complaint if he or she believes they were not treated fairly in a myriad of factors. Most common matters include:
- Charges: Sometimes applicants believes they were charged too much in fees. Most often, it is more a matter of the bottom line adding up to more than they expected. Sometimes, the mortgage broker did not explain a charge fully to the client, or the client did not understand.
- Sales practices: These may fall into the categories of the mortgage broker over-promising, hard selling, or employing a bait-and-switch technique. Often, the matter comes down to what is said versus what is documented.
- Deceptive advertising: This could be on rates (offering a rate that cannot be fulfilled), programs (offering a mortgage program that does not exist) or program originator (e.g., indication that a program offering is from the federal government when it is not).
- The runaround: Again, this is often a matter of perception, and will vary depending on the circumstances. A situation that the client perceives as the "run-around" might simply be the result of the hoops brokers must jump through today to close a loan.
- Lack of explanation of a loan program: If, for example, a broker did not explain monthly mortgage insurance required on an FHA loan to an applicant, the applicant may want to file a complaint. Here, it is important to look at the bigger picture. Is this one relatively minor mistake in a process filled with myriad details?
- Misrepresentation on the loan paperwork: One example could be if an appraisal came in lower than expected and the broker had to find a new program that qualified for the applicant, and then did not explain the situation to the applicant.
- Paying for an appraisal and then not getting the loan: Some applicants mistakenly operate under the belief that brokers have control over mortgages. An applicant whose appraisal came in too low to qualify for a specific program - perhaps because of foreclosure values in the neighborhood - may file a complaint because he or she believed the broker had something to do with the value.
- Misquotes on interest rates or programs: For example, a broker may state that a particular rate is available, and then it is not, perhaps because rates changed, the appraisal came in low, the applicant's credit score was low, or another variable.
What is a common scenario for existing homeowners filing a mortgage complaint?
Today, homeowners who file complaints on existing mortgage loans often do so about being in a sub-prime loan or when they become aware of a payoff term. Sometimes, a homeowner might complain to defer responsibility of the loan. For instance, someone who has borrowed heavily against their home, become overextended and got behind on his/her mortgage might file a complaint against the broker or lender to try to get out of the predicament.
Who should people complain to?
It is always best to try and resolve the situation directly with the mortgage broker or lender before filing a complaint. If the individual cannot get satisfactory resolution through phone calls or meetings with the broker, his/her manager, and on up through the chain of command, asking an attorney to write a letter can be effective.
If dealing with the broker organization directly does not work, then depending on the situation, goal and complaint, the next step likely is the district attorney, who will likely go to the broker and try to get a resolution. After that, the individual may wish to pursue with state regulators, the FTC or HUD, and/or trade organizations. However, the best results will come about at the broker level.
What does the process of complaining usually entail?
As far as communication vehicles go, there are help lines, phone calls, Web sites, e-mail and traditional mail. Which method to use will vary based on the complaint, and on the preferences and requirements of the organization and individual.
As in the complaint process for most things, the best way to obtain resolution is to gather all facts and then present your question or concern in a concise, professional manner. Whatever agency or organization you contact, it will take some time and effort to determine the best person with whom to deal. During this process, shouting at or displaying unprofessional conduct will not help obtain resolution any quicker.
Be clear and reasonable about what resolution you are seeking. In some cases, the person filing the complaint only really wants an apology. In other cases, they are seeking specific actions.
Make sure to document all conversations (subject matter, name of person with whom you spoke, time and date) and keep copies of all correspondence.
At the end of the day, remember that the problem usually resides in communication. Loan applicants need to realize that brokers are people just like they are, trying to do their job, and need to be compensated for their work. Clients would be well-advised to choose their broker carefully; the Better Business Bureau is one good way to check into a broker ahead of time.
Are there fees involved to file a complaint on mortgage?
The only fees involved would be to an individual's attorney if he or she goes that route.
Are there special complaint procedures for guaranteed loans, like FHA or VA?
Complaint procedures for FHA or VA loans are no different than any other type of loan. FHA and VA loans are simply loans that are insured by the FHA and VA, meaning that those organizations guarantees repayment to the investor in case of default.
Why do some people not bother filing complaints?
Filing a complaint takes time and effort, and can be perceived as "too much hassle" by many. Often, it is a matter of the loan applicant or homeowner just not knowing what their rights are and how to go about filing a complaint.
About Darius Mirshahzadeh
Mirshahzadeh has spent 10 years in the mortgage industry, and maintains a specialty in FHA lending and conventional mortgage banking. He served as CEO of Twin Capital Mortgage (San Francisco), which earned the No. 40 spot on the Inc.500 list in 2007, and the No. 3 ranking among financial services companies. The company also held the No. 10 spot on the San Francisco Business Times' list of fastest-growing private companies in the Bay Area for 2007, and was among the largest mortgage brokers in the Bay Area in 2006 and 2007.