Banks rake in on loan fees

My brother purchased a condominium in Los Angeles. He took advantage of lower rates and declining prices.

His realtor had prepared him well by making sure he pre-qualified with a direct lender. He went to Countrywide and was pre approved for $250,000. Within a few weeks he found a nice condominium priced at $220,000. After some negotiation he received an acceptance on his offer. Immediately thereafter he opened escrow.

The escrow was for 30 days and about the 15 days into the process his lender Countrywide home loans called him. They had an issue with his loan and would have to switch to a more expensive program. His heart sank and was dissappointed when they told him that the program he had applied for had changed and it did not allow a condominiums at this time. He had to go with another loan that was about $6000 more than the program he had applied for.

His realtor is familiar with loans and he advised my brother go with the loan but that he should negotiate the loan fees. According to the realtor if he was currently brokering the loan he would make $2500 commission from his end.

My brother called Countrywide to attempt to negotiate his loan points. He had actually seen the same loan program quoted online at bankrate for about half of what countrywide quoted him. His loan officer at countrywide advised him to apply with the other lender because they would not be willing to reduce their fees.

The realtor said that because the lender knew that he had a short escrow that they used that information to refuse to negotiate the rate.

I asked the realtor to suggest a loan broker who is competitive mortgage lender and hungry for business. He provided a local Los Angeles Mortgage Broker ekv financial.com . The broker listened to my brother's situation and said that time was short but it was not impossible to close in a timely manner. Seven days later my brother had his loan well into the process and locked in at a lower rate. The broker suggested that we extend the escrow about 10 days. We were hesitant but with good explanation the seller didn't hesitate to extend.

Now my brother is a proud homeowner. If its one thing I took away from his experience is that like any other business the consumer never loses his negotiating power. It simply comes down to the fact that the banks have customers lined up to deposit their paychecks so naturally they assume that these same people will gladly wait in line and do whatever the bank says when it come to home loans.