David vs. Goliath: Big Banks vs. Community Mortgage Loan Lenders
UPDATE: As a community mortgage lender, AmeriFirst Home Mortgage now services it's entire loan portfolio. This means you stay with one mortgage company and don't have to chase your home loan all over the country to different lenders and "big banks." This is a recent addition to the benefits of AmeriFirst, and thought we would share. Now, onto the original article:
Recent news reports about the "big banks" show them in an unsavory light. The feds say the banks are terrible when it comes to helping people avoid foreclosure. Even folks who work with banks to avoid foreclosure sometimes lose.
After her husband died, [Debra Dahlmer] couldn't afford her mortgage. But she has guaranteed disability income that could cover her payments if she had a lower interest rate. She should qualify for a rate reduction through President Obama's foreclosure-prevention effort, the Home Affordable Modification Program (HAMP).
[Her bank] enrolled Dahlmer in a temporary plan for making reduced payments. And even though she is following the bank's instructions and has never missed a payment, the bank told her it considers her to be delinquent.
The bank told her that's because Dahlmer has been making smaller payments through the government-sponsored foreclosure-prevention program. And [her bank] told her that if she doesn't pay the difference by the end of July, it would start foreclosure proceedings.
Sounds like this bank either doesn't have its own paperwork in line, or doesn't understand what it told a customer. Whatever is going on, this customer is facing foreclosure soon.
[Unfair] Financial Advantages
AmeriFirst president Mark Jones says, "Smaller community-based lenders could and would retain and service many more of their own loans if the Mega Banks were not given the huge pricing advantage afforded to them by a disparate "Guarantee Fee." This pricing advantage forces smaller would-be servicers to sell their loan servicing just to compete." Selling the servicing is a common practice, which means more and more loan servicing ends up in the hands of these mega servicers who are notorious for poor servicing and bad customer service.
Jones goes on to say, "This story is what happens when a big bank continues to try and reduce their head count and gain efficiencies….always on the backs of customers. And still there is a feeling of being "safe" when dealing with a big bank. It should be the other way around. People are safer with a community lender."
Big Bank = Big Problem
Another major complaint is that people have no direct point-of-contact with big banks because they all use call centers. You could call one day and talk to Michelle, then call the next day and talk to Dave. Michelle didn't tell Dave about your issue, so now you have to tell your story all over again. Then, when you call back in 2 weeks to check on your issue, you talk to Beth and have to start over...AGAIN.
With a community mortgage banker this problem doesn't exist.
Reuters News reports that Kansas City Fed President Thomas Hoenig called the big banks government sponsored entities and should be regulated like mortgage companies Fannie Mae and Freddie Mac.
There are slim chances [Hoenig's] proposal to classify banks as government-guaranteed enterprises would be adopted. Eighteen out of the 19 biggest U.S. banks have repaid 2008 bailout aid, removing most government investment over the last 18 months.
Hoenig's experiences shuttering banks during the savings and loan crisis of the 1980s, when over-investment in real estate caused hundreds of bank failures and necessitated a massive government bailout, shaped his views about how to emerge from the most recent crisis.
Hoenig also said banks are still not adequately prepared for the next financial crisis, despite new capital rules requiring lenders to raise billions of dollars to buttress against future losses.
According to this banking expert, it seems the banks are only in it for the investment side, and making money. Should the government regulate the industry?
The Bottom Line
The "big banks" are certainly not evil entities out to destroy homeowners. We work with these banks on servicing from time to time. However, as we grow here at AmeriFirst, our servicing grows and means fewer mortgages have to be "sold." Which in turn means more local service for you, the borrower.
Working with a community mortgage banker like AmeriFirst can have huge advantages. For beginners, we offer free resources for first time home buyers, renovation/repair/improvement borrowers and other mortgage holders, all in multiple media formats. You can check out the AmeriFirst Resource Library anytime.
When you're ready to talk to a local lender, let us know.
(David vs Goliath: Fried Dough)
*This article was originally published April 15, 2011 and has continued to garner views. We felt it was time for an update.