Real Estate Financing...

  Every once in awhile in this industry, I am amazed at the marketing efforts put forth by companies I see all over the board.  I try like heck to make sure I always take notice of mail, television, radio, flyers, etc, all designed to induce customers not only to refinance, but to do it with that particular firm.  Some are ingenious, some creatively misleading, some tacky and downright lame, and some are downright unethical. 

I got a call from a client just the other day who bought their home almost two years ago.  Because of a sketchy job history, beat up credit file, and to ensure the best deal for the borrower going into their first home purchase, I put them in what it called a 2/28.  Essentially, it allows the borrower to qualify for a better interest rate that is fixed for two years and typically adjusts after.....and more times than not, not down!  Because of their equity position, it was a good idea for the borrower to do just that.  Their rental history previously had always been stellar, they just had some credit demons from the past that they needed to correct and allow time to rectify.  So, in two years, when the time came to refinance, they would be in a good equity position and as long as they were good little boys and girls with mortgage payments and other applicable credit....their plan to lock into a lower fixed rate and a shorter term was good to go.

I've been on a regular contact basis ever since as I always try to do, emailing them reports on how to build a better credit report, making sure life is swell on their end, calling to see how the heck they are doing, and sending them a Christmas Card, the whole ball of wax.  The plan, come June, to refinance their mortgage into more ideal terms.

That call from that client came as an initial shock though when the voice on the other end said, "Jason, I don't know what I should do, I got a letter from my mortgage company and my rate is adjusting!"  I knew that couldn't be the case just yet so I asked them what exactly made them think that.  To which they retorted, "I just got a letter from them saying that it was!"  Okay....hmmmmm.  I told them to bring in the letter and the envelope and we'll see what is going on.

The following is almost verbatim what that letter said, though I've taken out the name of the particular mortgage company to protect the innocent...or maybe guilty?  Of note, the letter came in an envelope that you typically associate with something coming from the government (tax forms, lawsuits, etc). 

John Smith

1669 E Walken Street

Allentown, Pa 18109

MORTGAGE NOTIFICATION

***PAYMENT ADJUSTMENT***

Loan Amount:             $82,000

Lender:                       Sunshine Home Lending

Mortgage Holder:         John Smith

Property Address:         1669 E Walken Street

                                  Allentown, Pa 18109-2316

                               FEB 2007*                        APR 2007 - PROPOSED*

Principal Payment   $76.84                                  $0.00

Interest Payment    $468.71                               $222.08

Monthly Payment $545.55                                 $222.08

Your monthly payment reduction beginning April 1, 2007 is estimated to be $323.46. 
You are being contacted by RipUoffMortgage Corp. so that you may benefit from a reduced monthly payment.  In order for your new payment to be processed before your April 1, 2007 payment date, please call before March 23^rd, 2007 to confirm your new payment.   RipuoffMortgage Corp. cannot begin processing your new lower payment until you call:

Etc, you get the drift I hope.  The fine print at the bottom of the solicitation if you understood the jargon, was that they were basing the payment off the often times infamous pay-option ARM.  My concern wasn't that though, as much as it was the somewhat astute approach at getting a potential client in the door.  In fact, I had a problem with the fact that this company's letter came in the appearance of an official government document.  Ingenious, perhaps?  Unethical, maybe?  You decide.

I think I already have.