We’ve been hearing a lot lately about catalytic threads due to legislation trying to ban them.
If you’re not aware, when a lender pulls your credit score, credit bureaus will gladly sell your information to competing banks and lenders to let them know you’re shopping for a mortgage.
The result is being bombarded with phone calls and text messages with offers to use it instead.
They have not yet been banned, partly due to agencies such as The CFPB actually wants consumers to comparison shop more. This is one way to kind of enforce that.
Even if you haven’t applied for a mortgage recently, homeowners (myself included) have received official-looking mailings that appear to be from their current bank or loan servicer.
What on earth is the stock reserve summary?
I recently received a Stock Reserve Summary in the mail (and I’m glad I opened it so I could share it with you).
First, I’ve never heard this phrase in my life, but I think mortgage lenders use some version of it to attract homeowners.
The crux of the matter is that you have “stock reserves” that can be tapped if you call the number on the notice.
My private message listed the name of my old loan servicer (they didn’t know my loan had been converted to a new loan I guess), my property address, and a notional amount of equity available to tap.
It also has some random file ID numbers and a customer support center phone number with business hours listed, but strangely no physical location.
He also said: “Please keep a copy of this notice for your records.”
Sure thing.
Is this an official notice or official nonsense?
Basically, the companies that send out these forms do their best to make it look like an official notice. And that you need to respond as if it is something urgent or mandatory.
In reality, it’s just a cash-out refinance offer masquerading as an official-looking notice.
Now there’s nothing wrong with sending a refinancing offer in the mail. I get all kinds of junk mail for countless products on a daily basis. That’s just life.
The problem is when it looks like an official notification when it is actually just an announcement.
You won’t see that it’s from a third-party mortgage lender until you study the fine print.
The lender in question was one I had never heard of before. Again, it’s okay for them to advertise.
But when it doesn’t look like an ad, but rather something sent from my loan service, it seems a little misleading.
Mortgages are complex enough, so we don’t need any more confusion.
People don’t really understand things like loan servicing transfers, where the company that originated your loan sells it to another company to collect the monthly payments.
Or how a servicer can transfer your loan to a new servicer. This also happens quite often!
So when companies start making ridiculous reports like this, there’s potential for more misunderstanding.
And then you have to wonder if you want to work with a lender like this.
Always read the fine print to determine what’s really going on
If you take the time to read through these offers, be sure to hit the fine print section. You may need to pull out a pair of reading glasses.
When you read it, you’ll quickly discover that it’s a mortgage refinancing offer.
Although a (low) sample mortgage rate of 5.75% was listed, she noted that all offers would have different terms.
Additionally, it states that it is from a third-party lender, which is not approved by or affiliated with the current lender.
Disclaimer that actual price and payment may vary based on X, Y, Z, blah blah.
Finally, all information contained herein has been obtained from public record.
So unfortunately, once you become a homeowner, a lot of your information is available for companies to ask you for.
This is all well and good, but companies need to be more upfront and upfront.
Personally, I would like a potential mortgage lender to be more transparent if they make me an offer.
But I understand that these notices are probably more attractive and may result in a better conversion rate for the lenders who send them.
Just let this serve as a warning. The next time you receive an official notification, it might just be an announcement.
As I always say, if a lender reaches out to you, reach out to other lenders.
As the CFPB says, get multiple quotes rather than just the first quote you hear or see.
Especially when they include a line telling you that you need to call by a certain date to complete the “review.”
Before creating this site, I worked as an account executive for a wholesale mortgage lender in Los Angeles. My work experience in the early 2000s inspired me to start writing about mortgages 18 years ago to help potential (and current) homebuyers better navigate the home loan process. Follow me on Twitter for hot takes.
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