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Question: We are in the process of refinancing our $440,000 monthly ARM to a fixed rate. I called my current lender who offered us a 6.375 percent 30 year fixed loan with no points. The loan officer faxed us a Good Faith Estimate and we noticed that closing costs totaled $4,200. We were about to set up an appointment and get the paperwork signed when I spoke with my father-in-law who highly recommended a local mortgage broker. We called him on the telephone and he asked us several specific questions. Finally, he recommended that we refinance to a 7/1 ARM at 5.75 percent with no points since we are virtually certain that we will sell within seven years. He guaranteed that our closing costs would not exceed $3,900.

We went ahead and met with the loan officer and signed all the paperwork. Sure enough, the Good Faith Estimate indicated a 5.75 percent rate and a $3,900 closing cost guarantee. So far everything is working out fine and I don't expect any problems. In the meantime, I have received several e-mails and an angry phone call from the loan officer from my current lender. I had emailed him to tell him we weren't interested in refinancing but he keeps persisting. He even lowered his rate to 6.125 percent.

We have only had this one mortgage and are not very familiar with how things work. Are we obligated in any way to this loan officer? What are our responsibilities? We never filled out an application or signed any paperwork. Answer: You are not obligated to do anything and you have no responsibility to this loan officer. Sending him an e-mail expressing your decision to refinance elsewhere is not required but should be appreciated by the loan officer. Unfortunately, it sounds like this loan officer is using aggressive tactics to get your business. The mortgage business is extremely competitive, and it's not unusual for loan officers to engage in strong-arm behavior in order to close a deal.

Here are the facts: Anyone who goes through a refinance process is never obligated to go to settlement. In fact, for refinances on primary residences, the law requires a three day right-of-recession "cooling off" period in which the home owner can cancel the deal within three days of signing the settlement papers. You made the right move by not going with your current lender. Based on market rates over the last few weeks, I see that a 6.375 percent rate that carries zero points is not competitive for a jumbo 30 year fixed rate. The fact that he came back to you with a lower rate suggests that he knew he was offering you a lousy deal from the start. Perhaps the loan officer figured you wouldn't look elsewhere for a mortgage. At any rate, you are obligated to do nothing.

The fierce competition in the mortgage industry is a double-edged sword. Competition is surely a good thing for the consumer. It keeps prices down and encourages product innovation, allowing a consumer more product choice. But there are indeed too many mortgage consultants who use cut-throat tactics in order to generate business. Your situation with the current lender is a common scenario. A loan officer is certainly free to say what he wants, and the customer is certainly under no obligation to make application. But as a mortgage professional, I dislike the "used car" mentality of some loan officers. These guys are out to sell and close a loan. Period.

Frankly, this business is too complex for a third world street bartering mentality. Indeed, some folks searching for the best refinance deal enjoy such bartering. And it's perfectly within their right to do so. But folks who are not experts in the mortgage product line need a knowledgeable, honest and experienced loan officer who takes a role of an advisor rather than a salesman. It sounds like you found one with your father-in-law's recommendation. He asked you questions and helped determine your objectives. He then recommended a 7/1 ARM, a program that better fits your situation.

In contrast, not only did the loan officer working for your current lender try to gouge you, he didn't even make an effort to determine which mortgage product is optimal. I've said this many times before: The best way to increase your chances of working with a lender who is able to offer competitive prices and good advice is to seek out referrals from trusted sources. The guys with the "hard-sell" mentality don't last in this business. If your refinance process continues to be pleasant and without any surprises at the settlement table, take a few of his business cards and refer him. The mortgage business needs more knowledgeable advisors and less aggressive salesmen.

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