Insider secrets borrowers aren't supposed to know

Loan officer tells all in new book

By Robert J. Bruss
Inman News

If you are a home buyer, homeowner, real estate agent or involved with the mortgage industry, "Mortgage Rip-Offs and Money Savers" by Carolyn Warren will be an eye-opening read. The author knows the residential mortgage business as an insider, having worked in retail and wholesale lending as a bank mortgage loan officer for a direct lender, a mortgage brokerage, a finance company and a nationwide home-loan lender.

Just for fun, Warren also worked as a licensed notary public, attending loan closings involving many mortgage lenders who created outrageous rip-offs. Although she kept her mouth shut at such closings, where she was hired just to notarize the borrower's signatures, she shares the one closing where she spoke up to warn the borrower he was paying too much for the mortgage.

There are many excellent "how to get a mortgage" books, but this one is vastly different because it reveals the insider secrets even many mortgage professionals don't know. Warren reveals what really goes on in the home-loan business to get mortgages approved, and how borrowers can avoid becoming victims of their lenders.

The book begins with eight chapters explaining how borrowers can get the best interest rate and terms, as well as protecting themselves from lender scams. Along the way, Warren shares many real-life experiences of how some mortgage lenders make outrageous commissions by taking advantage of their naive borrowers who often don't know they vastly overpaid by thousands of dollars to obtain the loan.

The author is on the side of mortgage borrowers so she doesn't hesitate to explain how even "credit challenged" borrowers can obtain mortgages without being ripped off by their lenders. Rather than shopping for mortgages among all lenders in the phone book, Warren suggests limiting the loan-comparison shopping to just three lenders: two mortgage brokers and one direct lender.

The book's best chapter explains how many mortgage loan officers earn more than doctors and how they can earn $20,000 or more from a borrower who doesn't have the slightest clue. "Prepare to be outraged … I'm talking about the back-end commission you never saw on your paperwork. It's the money the wholesale lender passes under the table to the loan officer after your deal closes," Warren explains.

Then she emphasizes the dirty tricks some lenders use to conceal the compensation paid to mortgage brokers. In addition, she ruthlessly exposes unnecessary mortgage loan junk and garbage fees, which can often be negotiated away or at least greatly reduced.

She provides a valuable list of these 100 percent profit fees with creative names such as administrative fee, ancillary fee, document review fee, e-mail fee, title review fee, settlement fee, and even a photo review fee.

Toward the end of the book, Warren emphasizes why it is so important for borrowers to know the current "par rate" for mortgages so they won't be overcharged by their lenders.

As a former mortgage broker, she understands these individuals deserve to earn high-paying incomes. The author even explains how she won several trips from her employers for outstanding loan production work without ripping off her borrowers.

Although most of the book applies to home buyers, the last quarter of the book is devoted to home-loan refinancing and the pitfalls to avoid. Heavy emphasis is placed on the unexpected prepayment penalty some lenders try to implement at the last minute and how to combat lender dirty tricks.

Chapter topics include "Boost Your Credit Rating and Prequalify"; "Create a Short List of Three Honest Mortgage Lenders"; "Choose the Right Type of Loan for Your Situation"; "Request Three Good Faith Estimates and Compare the Costs"; "Uncover the Best-Kept Secret of the Mortgage Industry"; "Decide Whether It Makes Sense to Pay Points and Lock-in Your Rate"; "Avoid the Five Most Common Unpleasant Closing Surprises"; and "What You Must Know Before You Refinance -- How the Smooth-Talkers Work."

This is much more than an ordinary mortgage book because it reveals, from an insider's viewpoint, the costly dirty tricks some mortgage lenders play on their borrowers. It also reveals what borrowers need to know to get great deals on below-market-rate loans, how to handle subprime mortgage situations, and what to do if you get turned down for a loan or the loan doesn't close. On my scale of one to 10, this superb new book rates an off-the-chart 12.

"Mortgage Rip-Offs and Money Savers," by Carolyn Warren (John Wiley and Sons, Hoboken, NJ), 2007, $17.95, 222 pages; available in stock or by special order at local bookstores, public libraries and www.Amazon.com.

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