If you are refinancing or borrowing to purchase a home, loan cost is not the only issue to consider.
There has been a lot of publicity lately regarding the changes to the Real Estate Settlements Procedure Act which are designed to make it easier for borrowers to “shop” among lenders in order to obtain the very lowest cost loans. I would like to point out that cost should not be your only concern. Clients who have come to me after their loan closing with problems all seem to have their loans with huge national banks. These banks, perhaps understandably given the volume they face, have problems tracking payments, loan assignments, and other matters. One client, who had never been late or missed a mortgage payment, was accused by his national lender of missing one month’s payment. They told him that if he did not pay it immediately or provide proof that it had been paid, they would begin foreclosure proceedings. He had to do all of the legwork to prove that they received and cashed the payment, and he still had to wait “up to 45 days” for the bank to agree. He was told that there were other borrowers in the same position regarding the same month, and that the problem may have arisen from the bank’s purchase of a loan portfolio, but nonetheless, the burden was on him to prove that the lender received the payment. Similar problems arise when there is a need to prove that a mortgage with the national lender has been paid in full. Again, it is usually up to the borrower to prove to the lender that he made all of the payments, even if it has been years since his final payment.
I have also seen that national banks (by the way, I do not include HSBC or M&T in this category for the purposes of this entry) have not treated our clients, who are experiencing financial difficulties, in an understanding or humane manner. Most of our clients are content with the way they have been treated by their small, local lender. It has been my experience that local lenders are very understanding and willing to help resolve foreclosure and payment issues. I have not spoken with any big bank client who feels they have been well or fairly treated.
So, if you are refinancing or borrowing to purchase a home, give some additional consideration to your smaller local bank.