Is that Mortgage Deal a Scam or is it for
Real?
I write this article because the subject of being scammed or tricked on a mortgage
is a very popular theme in some circles and it seems that so many people are
watching out for being tricked that they miss out on a really good deal when
they do come across one.
The only safe way around it is to find a mortgage professional that you can
trust. Although this article concentrates on these scams, remember that most
mortgage professionals do have your best interests at heart and that sometimes
rates can differ because of many other factors than someone playing a trick.
Regardless, always keep you eyes open
Competition, a good mortgage professional who has truly found a great deal,
a mortgage company that just doesn't need to make as much money to be happy,
even mistakes made by beginners in the industry are all legitimate reasons for
any of the above things to happen.
Basically, there are 3 ways that those lenders with no morals are going to try
to trick you.
Offer a rate they have no intention of giving you,
leave out fees till the closing or
try to sell you on another product that you are not familiar with so they
can give you a higher rate
A trickster or con artist makes the scam look exactly like a real situation.
There are doubtless many borrowers who have been tricked and never realized
it because the scammer was such a smooth talker. The nice thing is that most
of these scams really are easily caught if you know what you are looking for
and do not let yourself get caught up in the moment.
Some Background on why there are scams
The mortgage industry has opened itself to the opportunity for schemes and
scams simply by having a system which is set up in such a way that makes the
lure of additional profits too large a carrot for certain brokers and bankers
and causes them to put their own pocketbook ahead of the good of the customer.
Of course, this is the same system which allows you to get a better rate on
your mortgage.
While it would be wonderful to go back to the days when you knew that every
lender only had your best interests at heart, the end result would surely
become a situation where consumers would be paying higher rates.
There have been many suggestions as to how to regulate the mortgage industry
and discussions are going on in congress as to how to make it easier for consumers
to understand mortgages, but each suggestion so far has had many flaws.
The inability of the mortgage industry to come up with a simple set of rules
has opened the door to those who would take advantage of the loopholes.
Money makes some people do crazy things
The first way to understand when you are being tricked is always to understand
the process behind it and where the money comes from that induces these unscrupulous
members of society to want to do it.
Basically, just like it may cost you a point to get 1/4% better on your rate,
if that unscrupulous lender can get you to pay an extra 1/4% on your mortgage,
they get paid another point! A point is a lot of money to pay and requires
a pretty big decision to make for you to plunk down that extra money. In the
same way, that extra point in someone's paycheck can lead those with less
morals to cross the line and charge you more.
So, now that you understand how much money is involved let's talk about some
of the ways these fellows will try to lure you in.
Offering rates you just won't ever see
When you see that most of the banks are very close in rates and there are
just a few offering a lower rate than all the others, red flags should go
up immediately!
If I were reading the rates in the paper, the fist thing I would do is look
for the lowest rate quoted and cross out all the companies offering that rate
just to save myself time.
Look at it this way, If your loan is $150,000 and this company in the paper
offers 1/4% lower than most of the other companies and that 1/4% translates
to 1 point, or $1500..... how can this company possibly afford to quote this
lower rate?
It's simple. They can't. They have no intention of giving you that rate. They
are either hoping the rate will be going down by the time that you actually
lock in the rate or they will smooth talk you that the rates have gone up.
Unless the market has been moving strongly (and it does happen!), If someone
cannot give you the rate they put in the paper, just say thanks, hang up the
phone and continue to the next phone call. This is a common method of getting
the phone to ring.
If you do find someone who insists the rates is real, you can stop any scam
in it's tracks by insisting that you get to lock in TODAY and you receive
a copy of the confirmation sheet of the lock in.
If someone says "we don't give out that information at this company"
they may just not want you to see details such as the commission fees or lender
account numbers or such. You can always tell them that they can black out
the commissions or information they want to keep considential and then give
you a copy so that you will see your name, your loan, the rate locked in and
how long it is locked.
Any respectable banker should be willing to do this for you.
"Oh, I never told you about the 1 point origination fee?"
Those bums. They get you right to the closing table and slide that first document
across the table and the fees are WAY higher. They expect you not to get up.
If this is not what you agreed on, stand up, put on your coat and offer to
come back when it is right.
A good mortgage professional will let you know in advance if fees have changed
rather than wait until you get to the closing table. Fees do sometimes change
at the last minute from mistakes at the underwriters, but these changes are
usually known about it in advance. If the banker didn't know, they should
be reaching for their coat with you!
At the same time, let me point out that what you originally receive is called
a good faith "estimate" for a reason. Some fees are not written
in stone when obtaining a mortgage and especially for a broker who may take
that loan to any number of lenders in order to get you the best rate, these
fees can be different.
An truthful broker will tell you upfront which fees are subject to change
and certainly should be able to give you an idea of what they might change
to.
As soon as a loan is submitted (and approved) the broker knows what the fees
are and the honest broker will let you know right away or they may say in
advance something like....."We can get a better rate from this other
lender, but their fees are $100 more, would you like to go that route?"
Have you heard of our exclusive "Super Duper Savings Mortgage"?
First off, unless you are talking to the bank itself, there are no exclusive
programs. All the brokers have access to the same programs. Some may not know
about them all, but they all have access to them.
Certain companies train their sales people to offer some obscure program that
sounds great, but is hard to compare and therefore can overcharge you on this
mortgage.
Some obscure programs really do exist though. The banks are always coming
up with something new to set themselves apart from the pack. The banks DO
use names like "Super Duper Savings Mortgage" too! So, don't discount
a program suggestion outright. Just say that you would like to compare options
with this program elsewhere.
An honest broker will have no problem with you comparing. Just remember that
the broker that came up with the great solution to your situation deserves
the credit AND your business if the program is real and the rates are the
same as you check.
In addition, it is always good to listen to suggestions about alternatives,
but if you say you are happy with what you called for and they persist.....again,
time to move on. You only want to work with someone who will do what you want
to do and what is best for you.
Summary
An honest person will let you know your options and let you choose.
If you have read this article, chances are it is going to be pretty hard to
pull one over on you.
I know this article doesn't really put you at ease because there are no sure
fire methods of knowing when you are being tricked other than when the papers
you receive are totally different from what you heard on the phone. But is
that really any different than other parts of our lives? Scammers and cheaters
are everywhere, be careful and work with someone you can trust.
If you think you might have been tricked or scammed and want to be sure. Email
me and I will give you an honest answer.
On the other hand, I also hope that this article may actually put you at ease
in order to know that a good mortgage broker may be more up to snuff on programs
that the other brokers or banks you have called and truly has a better deal!
That is what you are calling for anyway!
With so many lenders and programs out there, many times there is a diamond
in the rough and if you know how to tell the difference, you just might get
the deal that every savvy shopper is looking for!
DailyInterest.com
is brought to you courtesy of Scott Campbell of
30800
Telegraph Rd, Suite 1801
Bingham Farms, MI 48025
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