I am glad to have the chance to come here today and tell what happened to me so that others are not treated the way I have been treated. My name is Rita Herrod, and I am a sixty-two-year-old mother, grandmother, and now, great-grandmother. I am currently disabled and unable to work. I live with my daughter and grandchildren, and I own my home with my daughter.
In July of 1994, I bought a house in Clarksburg, West Virginia, for $22,000.00 for my daughter, Jennifer and her children. About four years later when I divorced my husband of thirty-four years, I moved into the house with my daughter and grandchildren, and I live there today.
In 1999 my daughter and I took out a loan to make improvements on the house. We got a decent loan from a local bank for 15 years with a variable rate beginning at 7.8%. I would end up not getting much of the benefit of this loan.
In early 2000 my troubles started when we encountered a mortgage broker we thought we could trust, Earl Young. My daughter Jennifer was working for Heilig Myers, where she met Mr. Young. Mr. Young, who worked for First Security, distributed his card to my daughter for her to distribute to others. Because my daughter knew Mr. Young and we had some bills to pay, we responded to his solicitation in April, 2000.
Mr. Young told us he would get us a home loan with a lower interest rate on our current loan. He told us he was going to search and find for us the best deal he could.
Mr. Young arranged for an appraisal of our house. He said not to worry that I was not working and not to worry about the rumors that my daughter would be laid off in the near future. The appraisal he got for my house, I found out later was for far more than it was worth.
We closed the loan the next month. We had to meet at Mr. Young's office. He seemed to have taken care of everything. He told us he was giving us a good deal. He said that our appraisal did not come back at what they wanted, so he had agreed to cut his own fees to work the deal.
I wonder now what part of his fees Mr. Young cut. He charged us an origination fee of $4000, a broker fee of $2600, and I learned from my lawyer that he got a kickback from the mortgage company of $3304 for getting me into a higher interest rate.
My loan was for just under $85,000, and I ended up paying over $10,000 in fees to Mr. Young. Now I say that Mr. Young appeared to take care of everything, but I don't think he did $10,000 worth of work on my loan. He took our information and arranged for an appraisal. I don't know what all else he did, but I know the mortgage company faxed him all the papers. I had no idea I was going to have to pay him so much, and I can't for the life of me figure out what I got in return. And while I guess Mr. Young charged me $4000 commission for finding the loan, and $2600 for his fees, I have no idea what he did to earn the extra $3304. Had I known $10,000 was going to be tacked on to the loan, I would never have done it. Had the broker not taken a kickback, I would have at least had a rate of 8.85%, maybe lower. Instead, I got a loan up near 10%.
I now have a loan that far exceeds the value of my house, making it so I cannot take advantage of lower interest rates and refinance. I am stuck with this loan, which requires that I make over $275,000 in payments at an APR of almost 10%. At the very worst, I could have stayed with my old loan, avoided the extra fees, and dealt some other way with my bills instead of putting them into my home.
I don't have any problem with people helping folks find a loan to help them out of a bind, or get them a good deal. But I don't think it is right for a broker to take a secret kickback of over $3300, when they already are getting almost $7000 in other fees. And I don't think it was worth $10,000 to get a loan that is worse than what I had, when there are much better deals out there. We trusted Mr. Young, because we thought it was his job to find us the best deal. But instead, he cheated us out of a lower interest rate and $10,000.
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