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Has Your Loan Officer Been Bamboozled?

Date:March 24, 2009 | Author:Justin McHood | Category:Costs and Fees

Your poor loan officer.

He may be getting bamboozled and he may not even know it.

Why You Should Care If Your Loan Officer Is Bamboozled

During the process of getting a mortgage, you will be required to enlist the services of a title company — and often times you won’t have a say which title company to use… in fact, you may not even be aware of it until your loan officer tells you which title company to meet at for your loan closing.

When your loan officer completes your Good Faith Estimate, he often times “estimates” the fees that the title company will charge and then selects the title company to use based on some criteria that you will probably never be made aware of.

Each title company has different fee structures and depending on state, they may be registered fee structures with the state, so it is not possible to adjust them when they are registered.

But…

It sure is possible that one title company charges more than another title company, which means if your loan officer hasn’t done a great job of shopping for the title company with the lowest fees who can provide title services on your loan, guess who pays?

You do.

Common Bamboozle-ing Techniques

Your loan officer may have been bamboozled by a particular title company with high fees in any one of a few ways:

They take him golfing
They take his boss golfing and his boss says “use this title company”
They take him to lunch every other week
They bring in doughnuts to the office once a week

Or — my personal favorite: the sales rep from the title company looks like this.

If you think that your loan officer may have been bamboozled into using a title company that doesn’t have the most competitive fee structure – all is not lost. You can easily request that your loan officer provide you with fee structures from multiple title companies and then ask him if you can choose the title company.

Because, after all – why should you pay if your loan officer has been bamboozled?

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Responses (0)

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Tony Sena 11:26 PM - Mar 24,2009

In Las Vegas, the agent representing the buyer usually selects the Title Company, not the loan officer that will be used. If it is an REO home the Bnak/Lender will have a Title Company already selected.
Dale Walker 7:05 PM - Mar 26,2009

Tony’s comments are on target. It’s not always up to the loan officer to choose the title company. Additionally, not all title companies are created equal. Finding a lower cost company does not ensure they are competent title officers and can get the loan done efficiently and on time. With all the things that can go south on a loan transaction, paying a little more to make sure title and escrow are nailed down is usually worth it, IMHO.
Justin McHood 11:23 AM - Mar 27,2009

@Tony,

Thanks for stopping by and leaving a comment! I should have made the distinction of “who picks the title company, when” and then talked about how in a purchase, it is often the sellers Realtor and if it is a REO property, it is usually the lender. Thanks for pointing that out.

Same rules apply though – I am amazed at the different decision criteria that people (loan officers, Realtors, whoever) use to select a title company.

@Dale,

Thanks for stopping by and commenting! An interesting thought… I wonder how many times the consumer ever asks any questions about why a particular title company was chosen? I have never even heard of it happening — but I think it may occasionally.

So if the consumer were to ask you “How come you are picking XYZ title company?” and your answer was “well, they are a little more expensive but they are worth it because they are experts at what they do…” I suspect that the consumer would just shrug and probably say “ok, you are the expert.”

But…

I suspect that the conversation with the consumer about why a particular title company was chosen rarely happens… if ever.

Which leaves room for bamboozling.

Total transparency = less opportunity for bamboozling.

PS right now, as I type this comment… my branch manager is possibly being bamboozled by a title rep. Wondering what that looks like?

http://www.arizonamortgageteam.com/title-company-reps-work-hard-too
Candace Robinson 10:00 PM - Mar 31,2009

Justin — I’ve seen this ‘bamboozling’ targeted towards agents/brokers more so than lenders. In our market here in Phoenix it is available to the buyer/s to request the title company in the Arizona Residential Purchase Contract. It’s not one party over the other that has the final say in this, it can be negotiated for each contract. However with that said, anymore in the market we are experiencing now with a high inventory of REO’s the lenders are pretty much calling that shot and for pretty valid reasons. It’s in the best interest for buyers to work with that title company simply because the lender has most likely opened escrow prior to their offer and they have a greater chance of making a cleaner offer when up against multiple offers.
One concern that hasn’t been addressed is RESPA issues with swooning lenders, title agencies and other professionals in the real estate industry. Be aware of what your boundries are and what might lie under a RESPA violation!
If my buyers are choosing and not familiar with local titles, I make it a practice to offer three title companies and typically familiar with all three from other transactions.

Most buyers are looking to their agent/broker to be the expert and you can be with offering great resources and allowing them choices. Just because someone might swoon me would not be reason enough to pick them over another, it’s about being competent and providing reliable, ethical practices for my clients!
Corey Vandenberg 10:48 AM - Jan 7,2010

I couldn’t agree with Candace Robinson more. This is just one more issue that could be twisted into a ‘steering’ accusation.

While the monetary damages might be minimal, the issue at hand is our credibility as professionals. We should be representing the best interests of our client, even if as lenders there isn’t an expressed fiduciary…there should be.

The best solution in ANY question of offering services to the buyer who will ultimately pay for those services, is offer choice. This way you are spot clean if anyone ever wanted to question your motives.

Finally, I’d just like to say that it is a complete myth that any of the professionals in the transaction “Get” to choose where their clients go for Title. Whats really happening 9 out of 10 times, is they just “DO” choose. But here in Utah, and I suspect other places as well, it is the consumer…you know, the guy paying the tab, that “Gets” to choose. I have made it a personal goal of mine to clarify this common misunderstanding any opportunity I get.

Of course REO excepted, when the seller makes it a requirement of the contract, then of course if you agree to those terms of the contract, then you close where they want it closed.
Corey Vandenberg 11:31 AM - Jan 7,2010

OH and Gina Gershon is hot…id give her my title business =P
MyTitleGuy 2:19 PM - Feb 4,2010

Great Post. First let me tell you that I am a Title Rep, next let me tell you that I absolutely agree! (To a point.) It really bugs me that I am painted with the same brush as others. Trust me, I make plenty of calls where the response from the Realtor or Lender is “I have a great escrow officer, I don’t need a rep”. They say things like this because they have routinely come in contact with the likes of the traditional rep you referenced…Golf, Lunches, etc. Good marketing reps actually help their clients generate business, they strategize as partners. Good reps encourage their clients to move past Web 1.0 and Out-Bound marketing techniques (Flyers, postcards, direct mail, Cold Calling) in favor of Inbound marketing (Blogging, Social Media, Analytics, RSS feeds etc).The days of the Doughnut dolly are gone now. Every one of your vendors (L.O. Title, Inspector) should be adding value to your business, if they are not and your in the Phoenix Metro area…..Call MyTitleGuy.
Insurance 1:52 AM - Feb 7,2010

great post, great sales rep pic as well