Mortgage Advisors – Whose side are they on?

June 22, 2010

Author: William M. Davis

Nick and Judy Splitzgerald are 4 months behind on their house note and doing almost anything to keep their two-bedroom starter home they’ve been in for 16 years. It all started when they refinanced their home 5 years ago. In hindsight maybe they should not have trusted their mortgage advisor.

Cautionary Tale

Even though they wanted a 30-year fixed-rate loan, the mortgage advisor somehow got them into a two-year adjustable-rate mortgage. The mortgage advisor also did not tell them that their payment did not cover escrow. When the new interest rate started 8 months ago, and at about the same time Nick was laid-off from his job at Richild’s Beef Emporium, they just could not make the whopping $1,750 per month house note anymore. “We just trusted him” said Judy. “We thought that the mortgage advisor was on our side.”

Mortgage Advisor Ethics

A lot of homeowners like the Splitzgeralds, thought their advisor were working for them. But, mortgage advisors are not legally bound to do this. Most claim that they are there to help the homeowners but the mortgage companies are for themselves.

Who Do They Work For?

Most folks believe that the mortgage advisor is working for them, not for themselves or any mortgage company, but are they? Some say advisors have a duty to cut back on predatory lending, like guiding people into high rate loans or refinancing loans that harm more than help the homeowner. The industry insiders say that advisors are forced by lenders to tell homeowner that they work as independent contractors.

Mortgage Advisors Have Expertise

Homeowners use mortgage advisors because they believe they are professionals that know a thing or two that the borrower does not know and that they are in a position to help them.

Industry Reform

As foreclosures rise some are looking at these advisors and pointing a blaming finger. Before the housing bust, lots of mortgage lenders and advisors aggressively looked for risky loans for homeowners that say they did not really understand the conditions or weren’t told the reality of the loans. So, homeowners with little or almost no credit at all sign risky loans that they couldn’t afford or borrowed heavily against the equity in their homes.

False Security

The Spitzgeralds looked for the aid of a mortgage advisor because they thought he would work for them. They were told they were getting a fixed, but through fast-talk and red-tape what they signed an ARM and they wanted things to be explained, but they were lulled into a sense of security.

Happy Ending

When the rate changed and their problems doubled when Nick lost his job the reality of what they were facing set in. They both work now; Judy as a fast food worker and Nick got work as the jester at the Renaissance fair, but with the extra tips Judy says they will “catch up”. Their advisor is no longer in the business and could not be found for a comment.