Are the Cash Call radio ads advertising a “no fee” loan deceptive?

I listen to 97.3FM and am a longtime listener of Dave, Luke, Dori (accidentally listening since 1995), Ron, Don, John, @thenewschick and @joshkerns38. I am so sick and tired of hearing the Cash Call radio ads that everytime one of the ads run, I feel the need to switch the dial over to satellite radio and I’ve been meaning to write this blog post for many months so here it goes. 

Radio listeners: There’s nothing inherently wrong with mortgage companies that advertise on the radio. This is one business model of many but realize that radio ads are not inexepensive and there are a few ways that a mortgage company can pay for their advertising. One way is to charge you higher interest rates.  But wait, how could they do that when they’re advertising low, low mortgage rates? 

The answer is one you will not want to hear but I’m going to tell you anways:  The rates advertised are likely NOT the rate that you will get.  The rate advertised is for a loan program that only a very small percentage of people will qualify for.  People with credit scores above 740. People with lots of equity in their homes, people who want a 10 year mortgage, or in the case of Cash Call, people who ONLY live in the state of California.  That’s right, the radio ad that’s running in Seattle comes with one caveat: It’s only avail for California borrowers.

To their defense, the Cash Call radio ad airing on 97.3FM does state that the rate and APR advertised are for a 10 year mortgage but realize that only a very small percentage of people calling that firm will end up with a 10 year mortgage.  This might come very, very close to a classic bait-and-switch scheme without crossing over the line but we don’t have enough facts to make that determination.  Instead the reason for their radio ad is to motivate radio listeners to pick up the phone and call. 

So, who’s on the other end of the phone?  The answer shows us another way companies that advertise on the radio make money. 

Any consumer who is curious about the licensing status of their loan originator can use the Nationwide Mortgage Licensing System’s Consumer Access website to check on the status of a mortgage company or individual loan originator.  When searching for the company name CashCall you’ll see many, many licensed LOs, okay that’s good. But dig a little deeper and you’ll notice that each person’s employment history contains many months of unemployment right around the subprime meltdown and lots of jobs held at subprime shops or other companies that only do radio or TV ads…Ditech, Amerisave, Countrywide, and other low wage side jobs outside of the mortgage industry.  That leads to the second part of how these companies make money advertising on the radio.

If they can’t offer you the lowest rates they’re advertising, then another way to make money is for the radio-advertising mortgage company to pay their loan originators a really low fee.  This is justified by the firm because…the company is making the phone ring! All the LO has to do is sit there, answer the phone and close the customer.  This is loan origination at its worst and if you don’t believe me just simply google:  Cash Call Complaints or Quicken Loans Complaints and see how many dis-satisfied customers they’ve left in their wake.

Homebuyers and refinancing homeowners should be wary of ANY mortgage lender that operates out of state and has no physical prescence in your state and if they did have an office here, why aren’t you working with a local person? 

Homebuyers and refinancing homeowners should always check the licensing status of their loan originator here and if their LO is not in the NMLS system ask WHY and ask to speak with their manager. Mortgage brokers and non-depository mortgage lenders must license their LOs. Depository bank LOs begin registering their LOs within the NMLS system this year. Maybe the person on the phone calls himself/herself an intake specialist or a loan something or other. Ask to speak with a licensed LO. If there are no licensed LOs then you’re probably dealing with a lead generation company and I’ll do a serious smackdown on lead gen firms in another blog post.

Companies like Cash Call and Quicken hire the loan originators who have no client base, don’t want to work hard enough to earn repeat business, only work part time, will work for a low wage, and/or are paid to close deals and not serve the best interests of their clients.  Do you want low rates? Go ahead and use one of these companies but you should have extremely low expectations of your rate being as verbally promised or the transaction closing at all. Expect pain and suffering. Some people pay extra for that, but now we’re getting off track.

Do you want your transaction to close? Select a loan originator based on his or her experience and knowledge. Choose a local company with a loan originator located right in your city so you can go into the office and meet with him or her face to face at application.  Yes, this will take time. Do you want your transaction to close and also get a fair interest rate? Then that means you will have to invest some time into understanding your options and understanding the documents you’re signing and that means human interaction whether that’s email, text or facebook messages.  You will need someone to respond to your questions who knows what they’re doing.  It is impossible to be a part time loan originator and serve your clients efficiently because there are far too many changes taking place on a daily basis.  A part time salesperson’s time and energy are split between many competing interests and self interest will typically win out every time. 

Kiel Mortgage radio ads are great. The radio ads from TILA Mortgage have improved over the years.  Best Mortgage’s ads are fine.  These are all LOCAL Seattle area companies with local loan originators and company owners who have been serving homebuyers and homeowners for decades.

I notice that on the Cash Call website, and on KIRO 97.3 FM, they’re advertising a “no cost” mortgage loan.  Folks, there is no such thing as a zero cost loan.  It doesn’t exist unless you’re doing a straight interest rate reduction refinance with your same lender, going through that lender’s loan servicing department and I think it’s even rare that that would happen nowadays with so many banks and lenders immediately selling everything to Fannie Mae or Freddie Mac.  Mortgage loans will always have fees and costs involved.  Some of those fees will be to the bank funding the loan, other fees will benefit the loan originator helping you, and still more fees will go to third parties.  Any company that tries to sell you a “no fee” mortgage loan is lying to you. The fees ARE being charged….they’re just being covered by a higher rate or they’re not telling you about the other third party fees that you’ll pay at closing unless you decide to read the fine print. 

So the opening call-to-action phrase on the Cash Call home page is a lie, the radio ads are deceptive and their loan originators are sub-par. I’m sure they’ll make several million dollars this year, pay a very small percentage of their profits in fines, and keep on using the radio to find more rate shoppers.  It’s a business model that works. Expect more copycats.

12 thoughts on “Are the Cash Call radio ads advertising a “no fee” loan deceptive?

  1. “Folks, there is no such thing as a zero cost loan. It doesn’t exist unless you’re doing a straight interest rate reduction refinance with your same lender, going through that lender’s loan servicing department and I think it’s even rare that that would happen nowadays with so many banks and lenders immediately selling everything to Fannie Mae or Freddie Mac.”

    Come on, you can’t be that in the dark. (Trying not to use the word ‘stupid’)

  2. Hi Vincent,

    No Cost loans don’t exist unless the consumer is going right to loan servicing for their loan.

    When the consumer chooses to cover lender and third party costs via selecting a higher interest rate and then the costs are covered by a credit from the lender funding the loan….that’s not a “no cost loan.”

    Because there are costs.
    The borrower is just paying them in the form of a higher rate, a little at a time, over the life of the loan.

    Advertising a loan program as a “no cost” when there are costs is considered a deceptive practice in all 50 states under the Dodd Frank Act.

  3. I just closed my 30 year mortgage loan with CashCall at 3.625% and APR, no closing cost what so ever (I paid only $400 for prepaid interest). I checked with Chase, and BoA and in order to get that rate, I have to pay 1 point and the total cash I need to close the loan is about $8,000 … the fact is I did save a lot of money by refinancing with CashCall (this is my second refi with them) … so what is it extra that I will pay over the life of the loan??? I got a lower interest rate compare with other big banks and no anykind of fees ….. so where is the extra I have to pay comparing with other banks???? Dont get it! (My sis also got that rate for her mortgage with Cashcall too even though her loan was more than 90% of her house value …. beat that!) … so your explanation on choosing a higher interest rate to cover the cost seems not quite right here, yes?

    HN

  4. I’ll be up front I didn’t read the full article, probably because it was crap from the beginning. “To their defense, the Cash Call radio ad airing on 97.3FM does state that the rate and APR advertised are for a 10 year mortgage” then going onto say that this is bait and switch because most people have 30 year loans is ridiculous and quite frankly extremely stupid.

    Same thing with saying that advertising a loan as “no cost” is deceptive, DUH! look on the website, the no cost loan has a higher rate, it’s essentially negative points. People need to take a little bit of responsibility here, I don’t see anything deceptive just most people(like the author?) are too lazy and stupid to either educate themselves or understand how things work.

    For reference I have refi’d with Cashcall 3 times in the last 2years, each time at the “no cost” rate, each time I refied I got the advertised rate or LOWER(on one occasion). To top it off, I didn’t even meet their stated requirements to get the rate on my last refi and they still gave the advertised rate and closed my loan within two weeks.

  5. Hi slacker455

    Wow, if you have refinanced 3 times in the last two years it sounds like this company may have really made quite a bit of fee income off of you.

    But I forgot—I’m supposedly the stupid one according to you.

    That consumer who is suppose to figure out what’s going on….that rule of yours probably doesn’t apply to you though.

    Advertising a no fee loan when there ARE fees (covered by a higher rate) is considered a deceptive advertising practice and a violation of WA State lending laws.

  6. Hello Jillayne,

    I know that nothing is for free, I know that Cashcall they have to collect the fees somewhere to keep their service going. However, I dont quite agree with your explaination, you keep saying “higher rate” is what Cashcall uses to cover the cost, let me ask you, higher than what rate? If you have some good numbers, examples to back up your explaination then it would be more informative to everyone. Base on my own experience with Cashcall, they offer me the lowest rate comparing to anybody else, I would have paid almost $10K for fees and point just to get the same rate as i got from Cashcall if i chose to go with Chase or BoA banks … so go back to my question, your saying higher rate then you should say higher rate than whose rates? And if those lower rates are technically not available to all of us then your comparision is invalid then. My loan with Cashcall was closed on Aug 29, 2012 at 3.625% and APR for 30year loan with no closing cost, the whole process took only 11 days from the day I called until the loan was closed. Do you know any lower rates offered by other places during that time in California? I believe you’re an expert on this matter and I look forward to seeing better explainations from you. thank you.

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