We All Pay for Multiple Loan Applications

Re Lew Sichelman’s article headlined “Playing Two Lenders Can Mean Savings” (July 6):

Looking for a lender is just like any other business:

Shop around, get your best price and ask for the best service. Ask your lender for the best rate and find out what it will do if rates drop. Oftentimes lenders, especially mortgage brokers, will offer a lower rate if the market takes a dramatic drop.

Sichelman is naive when he writes that “gaining approval by two or more lenders does tend to wreak havoc with their ability to manage their interest rate risk . . . but that’s their problem, not yours.”

No company, especially a financial institution, is willing to absorb losses without ultimately passing them on to consumers, so it is your problem. A loan application costs a lender on average $1,000 to complete, and it costs the buyer between $275 and $600 per application.

The ultimate outcome of out-of-control multiple applications is that the consumer will lose.

PATRICK LOO

Vice president

AmeriCorp Funding

Los Angeles

*

By getting approved by two lenders and playing one against the other, “Double Down” may have saved himself 0.5% on the rate. On a $150,000 loan, that would translate into a savings of about $50 a month. Sounds like a good deal for “Double Down,” but is it a good deal for the industry and his neighbors?

According to the article, the estimate is that 3% of all applications in a particular study were duplicates. What will happen in the future if the 3% figure goes to 6% or 10% or 20%? What will happen is that the industry will adjust to “double applications.”

Lenders can’t stay in business and continue to charge the current fees when they know that after the work is completed, they will not get paid.

No one in this business gets paid until the loan closes. Yet there are expenses: Who pays for the escrow opened? Who pays for the preliminary title policy issued? Who pays for the appraisal ordered to verify value? Who pays for the credit report? Who pays for the work that a lender will do to underwrite the loan application?

Costs are factored into the day-to-day operation of a business. However, when costs are incurred on loans that do not close, they become additional costs that will be passed on to future borrowers.

JOHN ROCQUE

Former president

San Gabriel Valley chapter

California Assn. of Mortgage Brokers