A cautionary tale

File this under: if something appears to be too good to be true, it probably IS too good to be true. A month or so ago Chuck was at a party and got to chatting with a fellow who was just wrapping up (keep that in mind for later) refinancing his home using a company called CashCall. The fellow said that rate they were offering him was 3.5% and the really attractive part of the deal was that there were no closing costs. That’s right: not low closing costs, NO closing costs. Wow! He said that the process had been pretty painless thus far.

This seemed pretty neat, so Chuck called them and asked what sort of rate we would qualify for. After the initial round of questions and answers, they said 3.75% but when they learned that we own a duplex, the rate went up to 4% (but since the guy misquoted us the rate initially he gave us a break and offered us a 15-year mortgage at 3.75% with no closing costs). This deal would end up costing us $300 extra a month but allow us to pour equity into the house. Now that was some kind of awesome for us as we currently have a 30-year mortgage at 5.75%. At that point we said, “Sign us up!” And with that the usual hoopla ensued. The house had to be appraised, a vast mountain of paperwork had to be signed, credit checks had to be run, yada, yada, yada.

So far, so good. We passed the credit check, we gave them our tax statements, the appraiser came out and appraised the house (walking around, he’d say, “Wow, what a great house! You’ve really done some great things to it.” And we were thinking, “He likes us, he really likes us! We’re going to get a super appraisal!”). The notary came out to the house and had us sign the usual pile of paperwork, and last but not least gave us our right of refusal documents and that, we figured, was that. When the notary left we figured, and she said, that the loan would be processed and completed in about two to three days. At 3.75% for 15 years.

Two days after signing the paperwork we get a phone call from CashCall. They decided that based on the appraisal of the house and our credit to debt ratio and our monthly net income, we no longer qualified for the 15-year 3.75% rate. Uh, what? What happened in two days? As far as credit to debt goes, we do have a car loan for Chuck’s Pilot that is a few months from being paid of, and I did lease my Mini Cooper and it has 10 months left on the lease. But that would be that as far as debt goes (other than the mortgage). Chuck asked how much more we’d need to have as income each month, and the CashCall guy came back with $1,000/month. That happens to be pretty much what the two car payments add up to. So Chuck said, okay, he would just pay them both off. That day. To which the CashCall guy said, well, that won’t actually matter. Because there isn’t enough equity in the house. About this time steam was coming out of both of our ears. We had gone through all of the steps, signed the papers and NOW they start jerking us around?

I think it was at about this point that we realized that we had yet to see a copy of the house appraisal that they had done. So we asked and they sent it to us. Now I know that house appraisals are a tad nebulous, and can vary widely. But when we got ours, it was off by AT LEAST $100,000. Sooo, combining the fact that we are self-employed, had all of that car loan debt and an undervalued house, the CashCall guy says that he can offer us a great deal on a 7 year adjustable rate mortgage. Oh hey, there’s a super idea! Let’s end up with no value at all in the house! I give our sales guy full credit for effort but after fuming over the weekend Chuck called them back today and said that we were done. We were feeling ripped off and not good about the whole process, so were going to sign our right to refuse and be done with it all.

Of course, the guy calls back because he has clued into the fact that he is about to lose us as customers and now he has a real deal (versus fantasy advertising rates) offer for us: 4.65% for a 20-year loan. We’ve come quite a way from 3.5% but it was still a much better deal than our current mortgage and there really weren’t going to be any closing costs.

Going back to they guy Chuck talked to at the party way back in the beginning, we figure he was at the same happy place we were after signing the documents last week – thinking he was going to get that awesomely low rate. CashCall just hadn’t burst his bubble yet.

So buyer beware – CashCall can get you a good rate, but don’t be surprised if it isn’t quite as fabulous as they advertise. Get hard copies of all documentation (they are very into emailing which may not give you the best at-hand  evidence you need when bitching at them). And be sure to ask to see the appraisal before you sign any documents so you aren’t surprised like we were. In the end we probably could have just talked to our current lender and ended up with a rate close to what CashCall finally offered. But with, say, BofA we would have ended up paying closing costs which can tack on thousands of dollars to a refinance, so even though we had the overall feeling that CashCall was kind of slimey, we did end up with a pretty good deal. That is unless they call us back and raise the rate AGAIN. BTW: in reading about these companies, we heard the same gripes about Quicken Loans, too. It’s a jungle out there, and reminds me of my worst experiences buying cars.