I received email about an article addressing mortgage fraud with seven points on how to get a sense that your mortgage broker may be too good to be real. The site is the Home Insurance organization and the article is 7 Signs Your Mortgage Broker is a Crook posted on March 26, 2012. This site offers a learning center, articles, a blog and of course home insurance quotes. I don’t endorse this site or any other, that I’m not entirely familiar with them. So don’t take this as an endorsement. But, it is a place to start, to learn and maybe to gain a golden nugget that will keep you from making a huge and costly mistake.
Here are the seven suggested indications that you may be dealing with the wrong broker for your mortgage.
A classic bait and switch trick, many mortgage brokers try to draw in clients by advertising low-ball prices that they have no intention of honoring. The mortgage market is no exception to this game of dangling attractive, too-good-to-be-true mortgage quotes to get you through the door, only to tell you down the road that you don’t qualify for the quoted price, or come up with excuses like that your credit score or property value is too low. Lenders and brokers have been known to play this game, and it’s questionable when quotes are offered a half-point or more below the lowest price being advertised. To protect yourself, do your research before responding to any low-ball offers.
- 1. Low-ball prices
If your mortgage broker does not mention certain fees right off the bat, they may be trying to scam you. Since this technique is so hard to regulate, many victims don’t find out about fees associated with their loans until it is too late to bail out. After they’ve signed documents locking in mortgage loans, fees will surface, essentially robbing them of money. Always ask your broker about fees attached to the mortgage loans they offer before signing any binding documents.
- 2. Failure to mention fees
Usually, there are instances where there is a lag between the time a borrower submits an application, and the time when official loan terms are locked. Your mortgage broker may tell you that the terms quotes at the time of your application may change, according to the whims of the market. Should market rates rise, you’ll see your loan rates raise as well. However, when market rates decline, your loan rates should mirror declining rates. This creates a prime opportunity for your mortgage broker to make some money, leaving the rate on your loans unchanged. You can combat this by monitoring the market prior to locking in your loan. Let your loan provider know you are doing this.
- 3. Leave loan rates unlocked
A mortgage broker may include a provision in your loan agreements that favors the lender, without mentioning it to you. So when you skim through documents and miss this one very important provision, your lender will end up pocketing an extra point or two for a prepayment penalty. At every stage of your mortgage loan, read all documents carefully and be aware of the prepayment penalty.
- 4. Contract chicanery
All consumers should be very cautious towards any broker who is willing to change numbers around to secure a home loan for their clients. Nothing good can come of this, even if you are in a desperate financial bind and need a home loan. These tactics only lead to the consumer being approved for a loan based on faulty information. It results in the consumer not being able to afford the loan and in the long run leads to greater financial turmoil that could result in foreclosure. Since your broker has nothing to lose from these situations, their only concern is securing you with a mortgage loan.
- 5. Willingness to bend the rules or change numbers
One particularly awful scam is targeted at almost bankrupt homeowners. Sold as a rescue loan to bail consumers out of a foreclosure, your mortgage consultant may try to convince you to “temporarily” transfer the deeds of your property to them, while waiting on your loans to be approved. It’s supposed to act as a safeguard against foreclosure, but once you transfer the deed, and subsequently give over your legal possession of the home, your loans don’t go through, and you’ve lost your rights as property owner to your broker. Some especially heartless brokers will even evict you or sell your property for their gain. If you hear the words, “deed transfer,” run away.
- 6. Pressure you to transfer deeds
The CRD (Central Registration Depository) is a reputable computerized database that contains information about most brokers, the firms they work for, and their representatives. If your broker is properly licensed, they will appear on this list, which also allows you to view any disciplinary problems or complaints about brokers in the list. Always check on the reputation of your broker on the web to avoid scams.
- 7. Your broker is not listed in the Central Registration Depository