Vol. 20 - Fight Lending Discrimination
Banking distrust dates back to the 1800s. If you feel there is any chance you are facing unfair treatment while applying for loans, particularly mortgages here are your tools to proactively advocate for yourself. We discuss:
Historical Mistrust
Professional discretion that may not lean in your favor
Scrutinizing the Truth in Lending Statement
Always ask “Is This the best you can do”
We want to hear from you! If you have money questions or if you want us to assess your finances, please complete this form.
Stay connected:
To read the full show notes, visit https://www.nursesonfirepodcast.com/cfp
How to subscribe, rate and review a podcast
To learn more about the giveaway, click here
Subscribe & Review
Love this episode? Please subscribe and leave a review on your favorite podcast platform.
TRANSCRIPT:
Naseema McElroy (00:00): All right, Nurses on Fire. We are back with Leisa Peterson, our Certified Financial Planner. And today we are going to talk about the historical mistrust of banks, especially in the African American community that dated back like to the emancipation of black Americans in America. After president Abraham Lincoln signed the Freedman's bank act in 1865. So basically there was this bank that formed and black people were expected to contribute to this bank, but they weren't allowed to get loans from this bank. And then ultimately the bank was called out on their unfair practices and shut down. Therefore, all the black people who contributed to this bank lost all their money. And so the story goes on and on and on where there's this historical mistrust of banks in the black community. And it still persist today. Like even with the last recession, the housing crisis, we see tons of lawsuits where the NAACP has a pile against lenders where people of color were given time and time again, subprime loans versus the conventional loans that they qualify for hints contributing to the housing crisis.
Naseema McElroy (01:20): And so these things have not been resolved in our community. I feel like even right now, I'm in the process of going through a mortgage and I still feel the impacts of that. I feel like I'm being unfairly treated in my application process. And so I just wanted to dive in and talk to you about ELeisa because you have insider information because you weren't in mortgage lending for over nine years. And so just to get your perspective on what's going on, and then we want to empower people so that they have the tools to prevent this going forward, because it's all about empowerment, right?
Leisa Peterson (01:56): Yeah. All about empowerment. And I think that what we were exploring offline and what we both determined would be most helpful for everybody to be thinking about is a couple things first that I think, like you mentioned to me, people go into a bank or they go into a mortgage company and they feel like they're going to be heard, their needs are going to be listened to they're going to be supported.
Leisa Peterson (02:22): And what I was bringing up is that there is that's true. I think that general spirit of the companies are trying to do that. But what I also know is that there is discernment and there is the ability before a mortgage banker in many situations, not all, but they have the ability to basically negotiate the deal that they put before you, there is leeway in whether they're going to structure a deal that is very tight for them. And they're not going to make very much money as the, as a sales of that mortgage, or there's going to be the other situation where they make it more rich for themselves. And we can't ever really know what the ulterior motives are behind, you know, what's going on because that information isn't always shared with us. Some of the stuff that they're paid is very, um, like brokers, for example, have to have a higher level of transparency about like what they're being paid and how they're being paid by the banks that the loan gets sold to.
Leisa Peterson (03:30): But when you're working directly with a bank like a Wells Fargo or a chase or someone else, a lot of what's happening is kind of behind the scenes where you don't see all the ways that that person is being compensated. And so granted the rules change. It's been a while since I've done direct production 10 years. But what I do know is that when you show up as a consumer and you are educated and you are informed and you know what you need from the perspective of the package, the loan package and what you're going to provide, and you've done your homework on what the current rates are and what the nuances might be. You gain more power in that negotiation, just like in any negotiation. So the more information you have and the more serious you are about the process and the more educated you are, the better deal you're going to get.
Leisa Peterson (04:30): And there's also this whole thing of like, people don't feel the, the leeway to take advantage of people when they are very professional and informed. Would you agree with that?
Naseema McElroy (04:44): Yeah. It's just disheartening because you think that is just a numbers game. Like they tell you that if you meet X, Y, and Z criteria, your credit score is this. You have this much money saved. You have this much money to put down your net worth is this. Then this is where you should fall. And they should be just cut and dry. And I think most people trust that, like I've checked off all the boxes, I've done all the things. So you should make sure that I'm getting the best rate. And it's really disheartening to hear. And this is the very first time I even heard that there is that professional discretion in leeway that can cost you hundreds of thousands of dollars, you know?
Naseema McElroy (05:25): And like I was telling you before, like, I feel like these things compounded with all the other things that we face as a person of color in this country compound to continuously perpetuate the wealth gap that we're seeing. And so it's really fresh.
Leisa Peterson (05:43): The other pieces is when you're buying a home in comparison to refinancing a home, you have more leverage to negotiate when you're buying a house. Because the ways that the mortgages are bundled together for a purchase loan are different than a refinance loan. So if you really want to negotiate, you're going to have an easier time getting a better deal on a purchase loan than a home refinance. So that's also important to notice, but, but here's the deal lenders really like purchase loans. Okay. So even if we just planted a seed for everybody that when you go into negotiate and we're bringing this whole word into the equation, but I want you to think about this when you go into negotiate that purchase loan and what they're going to lock that rate in for you, you want to, no matter what they offer you, you want to ask them, is that the best that you can do?
Naseema McElroy (06:47): Yep. So at what point does this come into play? Because you know, this is a long process. You're given these numbers throughout the process. Like for me, for example, I'm buying a new home. So it's under construction. So, you know, there's a little bit of lag time between when the house is going to close. Therefore they have a little bit of time to lock in the rate. Therefore the rates can go up and down. At what time do you come to them and say, listen, I know this is the rate that you offered me. Is this the best option? Is this the best you can do? Yeah. So just like you said, before you go to lock in the rate that when you want to have that conversation again, but my guess is, is when you first started shopping them and you decided if they were the ones you were going to go with, you could also ask that question at that time and get a sense of like, what am I dealing with working with?
Leisa Peterson (07:38): Let me go back and check, let me see if there's anything better I can do. And then you'll know if, if they do say they come back and they give you, like, let's say an even an eighth of a rate better, right? Or something better. You'll know that even if you're not locking in it. And during that conversation, when you go back again, you're going to want to have that exact same conversation again, because they will have forgotten. You're going to want to ask again, is this the best you can do now? There's the rate itself. But the trick is, and this is where we can't do the math in a podcast, but I can at least bring people's attention to it. For some reason, lenders really, really like to have you pay points to buy down the rate. But a lot of times those don't make sense.
Leisa Peterson (08:24): And they know it because people have a tendency of selling their house, like moving thing before the 30 years is out. And so you're buying down the rate. But if there is any chance, you're not going to be in that house for that full 30 years, then you need to evaluate the value of what they're offering you for the paydown in comparison to what it's going to cost you. I do not like fees. And I do not like buying down rates. It takes a lot for me to do that because we have a tendency of moving every, you know, four to six years, if sh if not shorter. And so the math never works for that short of a timeframe. So, but they keep doing it. They keep trying, they keep offering and they're like, Oh, this is great. And they make it sound so good.
Leisa Peterson (09:09): But if you just paused and you did the math again, we could probably give them some mortgage calculators or some links and things. But the deal is, is most of the time, it won't make sense. Let's say you have to pay $4,000 to pay it down and you start doing the math and it's going to take you 10 years to get that money back. It's not a good way to go. You see this ?
Naseema McElroy (09:31): Leisa, It's so sad because like, this is the first time I've ever heard anybody say that I've always been of the train of thought. Like, Oh, if you can buy down the rate, that's even better because that's going to save you more money. But that's how it's sold. Like, that's how it's marketed to you. Yes. Oh my God. This is such a great conversation because I'm just like, Oh my God, mind blown.
Naseema McElroy (09:54): Like on how many ways people can kind of get over on you, whether it's intentionally or whether it's with your best interest at heart. It's just all the more reason why you have to empower yourself financially and know, and not just trust that other people are going to do the right thing for you, because that's what we want to do. We want to just automatically assume that everybody has our best interests in heart. But as we have shown time and time again, that's not the case, Oh, this, this, this.
Leisa Peterson (10:23): there's the rate and there's the buy down. So that's one part of the discussion. The minute you decide that you're leaning towards working with somebody, even if you're not ready to lock in the rate, you want to get it in writing and get that truth in lending statement as soon as possible, because it's going to show you the rate that they're offering any kind of buydown.
Leisa Peterson (10:43): And it also has to show you any fees they're going to charge because fees are another place where there's huge discretion in what they charge. They say that there isn't, but I have witnessed time and time again, where the fees have gone away, because I have called them out on things and said, you're, I'm not going to pay that fee. Or why is this being charged? Or who's being paid this money? Like, are you being paid this money or somebody else? Like I questioned every single line item on the fees. They have a history of charging things and that they could actually consume and eat and not have to charge you processing fees, underwriting fees, like the appraisal fee. You know, typically that's going to be pretty standard.
Naseema McElroy (11:28): No, they charge me like a $600 fee to run my credit. $600. What? Yes. Okay. Yeah.
Leisa Peterson (11:36): That's totally unacceptable. Totally unacceptable. That's like a $45 fee at most. So then you look at that list of those fees, and then let's say you go back to lock in. You want to get that truth and lending statement again, because like you said, even in the course of doing your deal, some fees have changed. Some add ons have changed. You want to be able to compare side by side. So you want a truth in lending in the beginning so that you can make sure if anything's changed and then you can question them for the differences. Like, why did this be changed? Why did the speed change? And this was one thing when I was a mortgage banker, a truth in lending was the biggest and most important thing to me. And I would literally walk people through every single fee and tell them what it was for and why I needed to charge it.
Leisa Peterson (12:22): And if there was a way that I could get out of charging it, I didn't charge it. Or if I could pay it, I could pay it with my commission. Like, it's amazing what can happen when you just bring people into the fact that you are going to question every single line item and not just assume that it's an automatic cause maybe it isn't.
Naseema McElroy (12:42): I love this. I love this. And I love that we're giving people the tools to be able to speak their language. Like I love you have a piece of paper in front of you that you can go line by line through in question them and hold them accountable for it. So it's just not a victim's game here. Like now we have the tools moving forward so that we know what to do to protect ourselves and protect our money because we know what disadvantages we're coming to the table with.
Naseema McElroy (13:09): And so this is a great conversation, Leisa, even though it's got me fired up, cause I'm about to flip a table on somebody, but this is great because I'm sure. And I know for a fact that I'm not the only person going through this and sometimes you just don't know what you don't know. And it's so easy to want to trust other people that you might have a feeling in your heart that something is wrong or that you're not getting like the best deal, but you still proceed to move forward because you think maybe that's the best that you can get. And I'm here to tell you that it's not, if you're not negotiating, if you're not coming to the table, questioning every single thing you're paying for chances are, you're getting the short end of the stick. Yeah. It's interesting. Cause I think both you and I are trying to make sure that people are empowered.
Leisa Peterson (13:57): And this is part of like the communities that we build is giving people a place to go when you're in those moments of like, we saw this note, like, I don't know how to prove if I'm actually being discriminated against. So I think this is one of the reasons why we do want to have hanging out with us and asking questions, you know, and knowing that they've got safe places to ask these questions, cause this is not easy stuff. And we are turning the tide in big ways.
Naseema McElroy (14:27): Yup. Yup. And I'm so glad that you can be here with me in turn in a time. Like even, I mean like every time I talk to you, Leisa, I find out like something new and something great about your pas and your experience. That really has been an added value to me and my community. So I appreciate each and every moment that you've been here with us, because I mean, you are a gem.
Leisa Peterson (14:52): You are priceless. Thank you so much, Leisa. Thank you. I love it. These conversations, you remind me of things. I'm like, Oh, we got to share this stuff. Like, thank you. I need you to like be asking me these awesome questions, reinvigorating me for the fact that there is big opportunities here,
Naseema McElroy (15:10): but I love the way that you don't hold back and that you could have just easily been like, no, these things don't happen or just not disclosed like these things that are kind of like insider secrets, but your heart is in the right place. And I see that and I feel it. And I thank you again.
Leisa Peterson (15:27): Thank you.
Hey there I’m Naseema
My dream is for everyone to know that financial independence is attainable with a little intentionality. Learn how I can help you finally break the cycle of living paycheck to paycheck.
Join the Facebook Community
Join the Financially Intentional community and get access to resources to guide you on the path to Financial Freedom.
Watch these Videos To Learn How to…
Keep Listening
Here are some more episodes you may enjoy…
In this episode, we'll explore why disability insurance is important, how it works, and why it's important to have coverage.