The hypocrisy of working with Provident Funding

I felt compelled to write this post because of the hypocrisy I feel is involved when dealing with Provident Funding of Burlingame, CA. Provident Funding constantly sends out e-mails saying how much brokers love them. In their defense they do have good rates and an efficient online system, but at the end of the day they really do not bring any product or service to the table that is drastically different than what we have available from 3-4 other lenders we use.

I feel Provident Funding operates in a hypocritical manner for the following reason. Provident Funding guidelines state that if your lock fallout is above 25% you fall into “Tier 3” status and your account is “Subject to Termination”. While Provident has low rates they are difficult to get a hold of sometimes and some of their guidelines are absurdly rigid. They have overlays on top of standard conventional guidelines above and beyond whats typical throughout the industry. Because of this we have been using other lenders. We’ve been working with provident for 4 years (2008-2011). In 2011 we only sent them 3 loans to date (10/25/2011) 2 funded and 1 cancelled after being locked with them. The fallout was because the borrower (58% rate and term refi 820 fico single family residence owner occupied) was refinancing during a time when rates were dropping like rocks. Client was locked at 4.5% but before we got to the point of ordering docs rates had dropped to the point where the client qualified for a 4%. What should we as a broker do? On the retail side lenders usually allow clients to float their rates down, on wholesale side they don’t. As brokers we are supposed to offer our clients the best program they qualify for, as an industry we were villified for not doing this (see NMLS licensing rules, Dodd-Frank legislations, 4-1-11 compensation changes, HVCC etc., etc.) Because our volume of loans sent to Provident Funding was small 1 loan falling out pushes our fallout over 25% and they automatically terminated us for this. No chance to submit more loans to lower our lock fallout %, no chance to reimburse them for the financial loss they allege for the interest rate hedging (I offered to reimburse and no one bothered to respond). So basically what this lender is saying is that once a borrower locks a rate they have to close with them no matter what better deal is available to them, despite the fact that they can save hundreds of thousands of dollars over the 30 year term of the loan. Why should a broker get punished for this? There is a Federal law requiring that a borrower has a 3 day right to rescind for any reason, if they choose to exercise this option that can lead to an automatic termination of a broker-lender relationship with Provident Funding?

What Provident Funding is basically saying is that once you lock a rate with us the borrower has to close because it is in Provident Fundings best interest, who cares about the borrower and broker, if you don’t force your borrower into closing with us we are going to terminate your relationship immediately with no chance at redemption, no ability to discuss your standing with us. To me this is wrong and I think this practice by wholesale lenders should be illegal, especially in light of all the guidelines that brokers have to stick to in order to assure they are operating in a manner that best serves the customer.

In October 2011, Provident said they would consider re-instating our account if we sent them a letter requesting re-instatement. We sent the letter Nov 2011, followed up numerous times heard nothing but that they were busy and it could be months before they get a chance to review our re-instatement letter.

As of January 8th 2013 they still have not responded to our re-instatement request.

4 thoughts on “The hypocrisy of working with Provident Funding

  1. Provident is arrogant and have become impossible to work with. I’ve worked with them for over 10 years with no fallout, but because of an underwriting requirement that was impossible to satisfy immediately, they didn’t deny the loan– but called it a broker withdrawl. Over ten years this was my first ‘fallout’, but now I’m in tier 3 and expect to be banned soon from submitting loans to them.

    This refi loan would have paid off two medical collections and the current mortgage. The FNMA underwriting feedback approved the loan, and showed that the two collections and the mortgage were to be paid. But the underwriter wrote that the collections had to be paid PRIOR to funding.

    The borrowers did not have the cash to pay these collections PTD. I emailed the underwriter showing that the FNMA feedback DID NOT stipulate that the collections be paid PTD. She responded by stating that, well, then it was Provident guidelines saying that collections had to be paid PTD.

    But their guidelines did NOT say that, and I made a ‘case’. After about a week later, they agreed that the collections were to paid out of escrow. But, in the meanwhile, my borrowers asked if the loan could be approved by dropping the spouse with the collections off the loan. The DTI ratio ended up being a bit too high, and it wasn’t approved.

    So, later, l when Provident finally agreed that I was correct and that the collections could be paid through funding, we added the spouse back to the loan. And they ran a new credit report. And now one of the collections showed as “in dispute”. The FNMA feedback said that the loan could not be approved until the “in dispute” was dropped from the credit report. So we had no way to get the report cleared in the few days. The underwriter emailed me that they would have to drop the loan from their system– and that it would be considered a broker withdrawl, which hurt my fallout percentage.

    So, they screwed up the loan process, and the new credit report condition which Provident’s ignorant underwriting had caused, was impossible to satisfy quickly, but I was dinged for it. And get this– after doing some great investigative work I was able to find the phone number of the regional supervisor. I called and left a message with this person, hoping to get a sympathetic ear.

    In my message I left just my company’s name and phone number. But did he call me back? No. I got a call instead from the branch, who simply repeated the same Provident line– that they had correctly labeled this loan as broker fallout. In fact, I was told that Provident may soon call ANY loan that doesn’t fund as broker fallout, no matter who’s to blame.

    Does anyone know of other lenders who are as competitive with rates as Provident, while being professional and reasonable?

    • Typical example of how Provident Funding goes overboard. I hate how they jam those “Our Brokers love us!!” e-mails down your throat too. Your brokers don’t love you Provident, they tolerate your BS because you have good rates and a good technology platform.

      Try Eric Yang from stearns lending

      Eric Yang (714) 651-8657

      He’s got competitive rates and he actually provides customer service unlike Provident Funding.

  2. Thanks for your response. I agree completely. Their rates and technology are great, but their staff is inept and uncaring– in fact, their underwriting is about the worst I’ve experienced over my 30 years in the business. One of the main problems is the fact that it’s impossible to ‘go over the head’ of any branch.

    Apparently Provident’s higher-ups don’t want to be bothered by underwriting mistakes, slow and incomplete communication, etc. Each branch is a fiefdom, and since there are no AE’s, there’s no one available to hear the brokers’ issues.

    And I’ll check into your lender suggestion.

  3. Not only Provident funding frustrates the brokers. They now (9/17/2013) asks the brokers to pay a fullout penalty to get re-instated. Brokers are bringing business to Provident Funding. It is unthinkable that they are now asking the broker to pay up. The penalties are in the thousands.

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