Buyers Beware of Predatory Lenders

I have learned to avoid mortgage brokers for this and many other reasons. 

In my market, the local funding lenders normally charge lower fees, have the most competitive rates and usually do what they say.  I have not seen that to be the case with the brokers in any consistent way.

You are going to see this increase more than ever, because what has been going on in the financial market; thus, you will see lenders throwing out programs too good to be true.  Just saw one last week and threw them out of the office.  If it is too good to be true and you have to act within the month, odds are that something stinks, as they do not want to give you the chance to think.

Be smart and stay with only lenders you know well and can trust.

Randy: your local mortgage broker should be able to beat or match the rates and service of ANY so called direct lender.  Actually many, if not most, lenders who call themselves "Direct" are actually mortgage brokers with funding lines.  If you are directing your borrowers to real mortgage bankers such as Countrywide, Wells Fargo or Bank of America they are paying extra for the privilege of the "Big Name" 

Whew... that said, I strongly advise everyone to stay away from on-line and telemarketing lenders of any kind.  They are almost always utilizing "Bait and Switch" tactics.

Bill

There will always be some taking advantage of others....even Congress took advantage of others with their Bailout bill!

Randy - My experience and that of my clients has been positive with mortgage brokers that I know to be honest, competitive and professional.  Just as in every profession, you have to know who you are dealing with.

Tim - That needs to be our mantra to our clients. 

Bill - My personal experience with on-line mortgage professionals has been negative.  I was bait and switched on 2 occasions with 2 different on-line lenders.  Your advice is timely.

Gary - isn't that a shame?  The jury's still out on how that's going to play out.  Thank you for your comment.

Good advice indeed.  One of my clients just recently got contacted by a lender by phone, but my client was hip to it, and did not get suckered into a bad loan.  Unfortunately, the predators are still out there.

Fran,

Well deserving of the star! Why hasn't anyone gone after these 'predatory lenders'...we've known about them for years...and they may have contributed more to our mortgage ills than the so called 'sub prime' loans!!! Thanks,   Fran

I have been in the mortgage business for over 20 years and applaud every effort to get rid of any predatory lender or lending activities. Unfortunately in my market there is a lender that has put hundreds of people in Pay Option ARMs that touted LIBOR as a "safe and stable" index when I was advising exactly the opposite.  More than a dozen of her customers have come back to me upside-down, paralyzed because they got addicted to a payment based on the 1.5 percent start rate. Now that same lender is trying to profit once again by offering to help people "work out" their financial turmoil.  No matter who complains these lenders seem to stay in business and never get locked up and put in jail where they belong. I was always taught to never criticize your competitors (sour grapes) but when they ruin people's lives, and suffer no consequences, it goes beyond the pale.

i just had a customer who dealt with this. 

Fran

I've been on both sides of the fence in my 35 plus years in mortgage finance.  It is very unfortunate, but there may always be some issues of this type.  It's also not just the Brokers.  I have had Wells, Countrywide and more breathing down my neck for years for me to do business, many touting their loan programs that made no sense.

Transparency, is what we really need to address.  As a former banker and mortgage banker, I can attest.

Are you aware that by law, a brokers must formally disclose All fees?  Whereas, banks or mortgage brokers and the likes of online brokers...aka Ditech and LendingTree do NOT since they are direct lenders.  These lenders earn anywhere from 1.75% to 3.00% on the back-end from Secondary markets Without the requirement to disclose to the consumer.  Yet, their advertising boasts of having no hidden fees...and Yes income from Secondary is Revenue;thus a fee earned if not passed onto the consumer as a credit.

HUD and the Feds are keenly aware of this and do nothing to make it a fair playing field. In-house lenders could be thrown into that arena too.

It was unfortunate for your client to have that experience, and not good for our industries as a whole.  Remedy?  Report them!  The DRE and Federal agencies have ways to correct this when reported.

Thanks for your post.

Best Regards,

Wayne

Tamara - I am happy for your client.  Unfortunately, my client isn't going to have a very happy ending.

Fran - Thank you.  I found the owners retort of, "Everybody has to make a buck." sickening.  He shouldn't be ripping off a dear, sweet lady who can ill afford his excessive fees.

Kevin - I want to say those types of lenders will get theirs in the end, but it so often seems that bad apples just keep on keeping on.  Continue to give good, reliable and professional service, there is no better way to live life. 

Dan - I can see that my client is not alone.

Thank you for your comments.

Wayne,

My client is going to do just that.  Hopefully something will come of it.

It's 2008 and counting! Fortunately, the new National Mortgage Licensing System is just being rolled out (Washington was a priority state). All the good guys are still standing. Nationwide, over 50% of brokers have left the industry for vaaious reasons.

There IS a loophole however for Mortgage Brokers calling themselves Mortgage BANKERS. These dudes fall into a grey area because the money passes through their own account for a millisecond. Your other brokers commenting here are correct: Brokers have to be much more transparent in our fees and our new federal Good Faith Estimate is supported by a Summary of Fees AND a Service Provider Statement...several pages declaring who is being paid and what our relationship is with that provider. I beat the local banks daily on their rates and fund people they turn down --which is why I am still standing!

It's 2008 and counting! Fortunately, the new National Mortgage Licensing System is just being rolled out (Washington was a priority state). All the good guys are still standing. Nationwide, over 50% of brokers have left the industry for various reasons.

There IS a loophole however for Mortgage Brokers calling themselves Mortgage BANKERS. These dudes fall into a grey area because the money passes through their own account for a millisecond. Your other brokers commenting here are correct: Brokers have to be much more transparent in our fees and our new federal Good Faith Estimate is supported by a Summary of Fees AND a Service Provider Statement...several pages declaring who is being paid and what our relationship is with that provider. I beat the local banks daily on their rates and fund people they turn down --which is why I am still standing.

Here's a link to our Mortgage Broker magazine that goes into more detail about the S.A.F.E. act and how they are rolilng out the new national licensing system.

http://www.scotsmanguide.com/default.asp?ID=3167&part=1

All the best! Susan

Fran, you speaketh the truth my dear! It's crazy. I've been getting emails from people wanting me to set up reverse mortgages and put portions of their weekly checks into my pockets? Man oh man.

No way. Everyone should read this post. Thank you,

Later in the rain~Deb

Fran...sadly,it's all about the money for a lot of mortgage people. Thanks for sharing your experience.

This is great advice. You'd think with this being in the news for the past year that people would know about it and furthermore that predataory lenders would change their business practices but unfortunately this is still something we see as they claim to give out "easy mortgages" and use terminology such as "guaranteed approval".  It's quite shocking really but unfortunately with a downmarket so too comes greed and desperate entrepreneurs like the "turn gold into money" campaigns which you may have seen late at night as of late. Be very wary in regards to what you invest your time and money into right now as this trend can be seen all over.

I dn't pretend to know the mortgage business. Although I have enough experience to read, understand and advice a client. I am fortunate to have three lenders that I have been with for thirteen years and they take care of that side of things. I think you develop relationships and it takes care of a lot.

I know I have saved at least 3 people from lenders just like you descibed in my career and I hope to never have to do it again. I think these people should be put out of the business and in some cases be put in jail!