Transferring your home loan? Tackle these ten things right

Sukanya KumarRetailLending.comThe mortgage industry is getting more competitive as many entrants fight for the defined space. All lenders continue to indulge into this lending type, but complain of narrow margin. There must be something positive about this lending against immovable properties and the secured lending which no lender accepts with grace but keeps cribbing. Still, the source says there is 18000 crore market in India every year and increasing.Mortgage brokers are also aggressive in selling their services to the HNI as well as the affordable market. Online presence of most lenders and service providers has made choice easy for borrowers, as well as difficult. Easy, because of the instant information, comparison and in-principal sanction of loan; and difficult because it's always confusing when you have plenty options.A major part of the mortgage business in India today is balance transfer, where a borrower transfers his loan from one lender to another. Now, in this fierce competitive market, lenders do not want to let go of the existing portfolio, in fear of diminished book size. But wanting to retain a client is not always via methods one would expect. There are new rules being incorporated by lenders subtly, to make the exit difficult and tiresome for the borrowers. So, what's new? What do you face when you intimate your present lender that you want to switch over to another one?(1) Foreclosure letter:This is a letter issued by your current lender in which the outstanding principal amount will be mentioned, so that the same amount can be paid off by the new lender.Earlier, a simple request letter sent through a person, or placing a call in the call centre to know your foreclosure amount was sufficient. You would receive the letter at your communication address in a few days.But now, lenders refuse to accept letters OTC in branches and the call centre passes on the number to the sales manager who sourced the business, so that a dialogue in trying to retain the borrower starts. Both are an unnecessary inclusion as the borrower needs the letter and not someone keep calling him to know 'why' 'how' 'when' he decided to switch and 'what' rate is he getting with the new lender. It's a futile discussion in most times, as the smart borrower must have done plenty research to have decided to switch and nobody does that without being sure that the present lender cannot match his requirement. Most importantly, it's not always a reduced rate of interest which makes a person switch.(2) List of Documents(LOD):Almost all private lenders avoid issuing this document at the time of disbursement of loan, for some technical reason. This document is the list of originals and other papers held by the lender and is of utmost importance to the new lender which helps them recover the documents. For seeking this documents at the time of switching over the borrower has to go through a process, which is completely avoidable, as the borrower has the right to get this document, irrespective of the matter whether he is switching or not.(3) Penal charges:Some penal charges appear at the nick of the time of closure which was never known or asked for from the borrower earlier. Such as, cheque swapping charges, new document issuance fee etc. which no one has the time to enquire or fight for.(4) Interest calculation:It is obvious that your loan will be taken over by the new lender on any day of a month and will be closed on any day. Even if you can control the issuance of the DD with new lender, accepting the DD by the previous lender and giving the borrower the 'credit date' is completely out of one's control. Some lenders calculate interest on monthly reducing balance and will collect interest for future period(till the next EMI date) even if the loan is foreclosed before that! Very few lenders will give any clarity on it. One lender issues a foreclosure amount for the 'next 15 days' and the amount is same for those 15 days. How can that be?(5) Collecting originals:After closure of the loan, the new lender is eligible to collect the originals as they have paid the amount and that should be done for safety of the new lender. But almost all lenders send the originals back to the borrower! Recently, most of them insist that the borrower walks in to their branch to collect the originals himself. Now one might think that this is for the safety of the documents, but I have a point here. If the borrower never visited your branch for submitting the originals and you used your peon, document guy, runner boy, junior executive, loan agent and their unknown resources to collect it from his, then why not send the originals back at your own risk and responsibility again and not give pain to the borrower to walk-in? To top it, one particular lender needs you to bring one and all co-borrowers while collecting the originals, failing which they can refuse to hand it back to the main borrower! In some cases that lender insisted on a GPA from all other co-borrowers to be given to him (though all this while they were deducting the full EMI from his account and never cared whether the other borrowers dead or alive).(6) Paying fees:Strange as it may sound, one needs to pay a fee to get his LOD and foreclosure amount from a lender and that too, it has to be a cheque. So, if you forget to take your cheque-book while visiting the branch for seeking these documents, you need to make another round trip. But at the time of giving you the loan, cheque from your co-borrower, DD, nil fees....... every option was available.(7) Paying visits:As mentioned earlier, they insist on your visit to the branch. Now, this is purely to try and retain your business. I understand that it's a noble cause. But then why not visit the client and make him visit you? Didn't you offer him a doorstep service while doing his loan, didn't you promise him an online banking and downloadable options on your site for everything? Why does your attitude change when you fear losing him as a client?(8) Follow-up:Recently a client of ours tried sending mails to his lender seeking the LOD and foreclosure. Prompt came an acknowledgement that it will be attended soon. One month passed by and there was no revert. He called the call-centre and there instead of taking down his request, he was asked plenty questions. The same why-what-when-how etc. with a promise that he will receive a call. Strangely, no calls came in next 10 days. When he called the call centre again, they said there is no record of him seeking a closure letter earlier and that they will need 10 working days to process! His loan with the new lender is already approved, but he can't switch. After 15 days he called the call centre again as he didn't receive anything. He was told that it was already issued and lying in the branch. So, he was asked to go to the branch. He went on a Saturday when he was off from work. After taking a token and waiting for one hour, he reached the counter to find that the foreclosure letter states that it 'expires' in 7 days and it was the 7th day. The counter-guy smiled and asked him to apply again for a fresh one. He seemed to be kind-hearted and told him that he can generate it in 3-5 days, but he needs a fee of 570/- for that. Our client was instantly willing to pay, but the counter-guy said he only will accept a cheque from his bank account. So, he now has to go back to home and get it and since the branch was about to be closed, next weekend is fine too.Imagine.......!!(9) Not having collected originals from builder:Another client of ours realised that his lender did not collect the original registered deed from the builder though the registration was done over a year ago and he intimated the bank too! Now while transferring the loan, the new lender wanted the deed in custody of the present lender, which was a lot of co-ordination between builder and the bank. The builder, as usual, refused to handover the deed to anyone else other than the lending bank, who never seemed to be interested in closing this out. The business was done, the EMI-s are regular, does anybody care about a sale being closed a few years ago?(10) Refusing to accept the closure amount:Finally, your new lender goes to close the loan and he is handed out a form to be signed by the borrower as well as his co-borrower requesting the closure. Though a proper channel of communication was used by mail, call to the call centre and foreclosure letter as issued too, this was a 'formality' asked for by a particular lender. They did not care whether the co-borrower was traveling, sick or away, they needed that. Their refusal means the borrower continues to pay interest in both the lender's place for one single loan, till this can be addressed.So, what is the way to overcome these issues? Well...may not be all 10 of these but a loan agent can help you overcome 7 of these. How? By educating you how to go about it, rather than you discovering it on the go. Loan transfer will be like a challenge these days, if you do not know the path.