 |
| 30 Yr Fix |
6.01% |
-0.04% |
| 15 Yr Fix |
5.60% |
0.00% |
| 1 Yr ARM |
5.18% |
-0.11% |
| 5/1 ARM |
5.57% |
-0.10% |
| 30 Yr Tres |
4.58% |
-0.06% |
| Fed Prime |
5.00% |
-0.25% |
|
|
|
|
 |
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Mortgage Fraud and Predatory Lending Practices
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As previously stated in this space, the FBI announced on September 17 that mortgage
fraud is rampant, and that it is putting its considerable clout behind solving
the problem.
Oh dear, another of those boring corporate scandals that only accountants and
The Wall Street Journal understands or cares about. Well, not exactly!
In the first place, mortgage fraud is hardly boring. Organized crime is often
involved, and even petty criminals pull off some pretty amazing coups. And while
accountants and the business media have a vested interest, so do bank regulators,
community groups, and secondary market investors.
And so should you! While financial institutions and the federal government
are by far the biggest victims in terms of monitory loss, mortgage fraud is
not just "their problem"
Illegal activities aimed at your community bank or big nationwide lenders eventually
and inevitably lead to higher loan costs and more restrictive lending practices.
If widespread in one area, these scams can result in an epidemic of foreclosures
and abandoned properties. A concentration of these can destroy neighborhood
property values and damage the lifestyle of hardworking and responsible residents.
Frauds that target federally guaranteed loan programs will - let's
all speak in unison here - lead to higher taxes.
Mortgage related fraud against financial institutions is a complex topic which
we will discuss later. Some of these schemes are intricate and clever enough
for a crime novel; consumers, especially gullible and/or greedy ones, are often
caught up in them; and many are fascinating from the standpoint of how far the
unscrupulous will go to make a dishonest buck and how often their victims seem
eager to help them do it.
But first we will take a look the victimization of individual consumers by
fraudulent and predatory lending practices. At best, these practices are annoying
to potential victims, but for the actual victims the end result is the loss
of a home, financial devastation, and destruction of hard-won credit ratings.
Over the next few days and weeks we will describe some of the scams that target
home buyers and those refinancing existing property. We will discuss some actual
cases, alert you to warning signs and suggest some ways to protect yourself
and where to go if it is too late for that.
Predatory Lending Practices
What is Predatory Lending? Predatory lending is the term used to characterize the usually fraudulent
but always unfair and deceptive mortgage practices directed
at consumers. Homeowners seeking to refinance are the most common targets, but
home purchasers are not immune. At particular risk in the latter category are
buyers who, because of credit problems or self-employment income, may not qualify
for a conventional Fanny Mae/Freddie Mac mortgage and must rely on a sub-prime
lender (one who, for a price, is willing to assume a higher risk than conventional
lenders) to purchase or refinance. Also at risk, not surprisingly, are those
seeking to buy in neighborhoods that have been red-lined (i.e. discriminated
against) by conventional lenders. These are almost universally low income and
usually minority neighborhoods, often in need of a substantial upgrade in housing
stock. Buyers in these areas are, therefore, by default, placed at the mercy
of sub-prime lenders.
But, beyond sub-prime lenders, there are a startling variety of people involved
in fraudulent and predatory practices - big banks, the kind with their names
on NASCAR billboards, loan servicing companies, small time con artists who once
peddled aluminum siding and water filtration systems, loan originators working
for otherwise legitimate firms, real estate attorneys, home builders, real estate
agents. Predatory lending is profitable, and the opportunists have come out
of the woodwork.
Oh, and watch out for Uncle Ed.
We present here our own list of predatory practices and the tactics that are
used to promote them. We haven't yet totaled up the number on our list,
mainly because they keep popping up as fast as we can write them up. Nor have
we tried to categorize them by target, method, or intent. But here are the first
few of our top ten, or maybe twenty, in no particular order.
1. Aggressive solicitation by lenders. Predatory lenders are pushy in their
approach to borrowers. Their ability to telemarket has been curtailed by the
Federal Communication Commission's "No Call" rule, but they
have the Internet, door-to-door salespeople, the U.S. Mail, flyers dropped on
doorsteps or in mailboxes. The pitches are strikingly similar no matter who
delivers them:
- We can lower your monthly mortgage payments
- We will save you hundreds each month by consolidating your credit card
and other payments
- You can use your equity to buy that new (car, boat, kitchen, dream vacation
- take your pick)
- You can save your home from foreclosure; refinance your way out of bankruptcy.
And they don't take no for an answer. If you don't like one approach,
they will try another. They insinuate themselves into your life, become a friend
to the lonely, (making them particularly dangerous to the elderly who often
have substantial equity in their homes.) One Internet lender sends me a minimum
of three emails per day. When I "unsubscribe" they start up again,
within the week, with a different email address
2. Home improvement scams. This practice is a favorite topic of "gotcha"
journalists, as well it should be. But, they expose it in 1998 then forget about
it until 2004. In the interim, millions of people are victimized.
The classic operation is a team thing. A homeowner needs a new roof or structural
repairs, and approaches a contractor. Or maybe he has a long-held dream, a second
bath or a new kitchen. Often he isn't shopping, just dreaming. Then the
doorbell rings. A contractor "working in the neighborhood" has equipment
already on site and can offer a deal on any project. AND, his company can finance
it (the paper will then be sold to a predatory lender) or he has a "friend"
in the mortgage business who has a spiffy new home improvement program.
Snap goes the trap. The homeowner agrees, the papers are signed; the work
begins immediately, often before the three day loan cancellation right ends.
The work is overpriced, shoddy, and often done without proper permits that would
require inspection by the local building inspector.
Of course, the double whammy comes with the loan. It will be a poster child
for predatory lending, with a high interest rate, burdensome fees, and most
likely a pre-payment penalty that locks the borrower in for an extended period
of financial torture.
Homeowners who have been impacted by these dreadful seasons of hurricanes,
tornados, and forest fires should pay particular attention to these home improvement
scams. The teams are probably in your neighborhoods, even as you read this.
We have only just begun. This series will continue with information on other
types of predatory loan practices, advice on how to protect your home and pocketbook
from the scammers, and where to seek help if it is too late for that.
Related Tags
Select a Tag for more information related to that Tag. (View
All Tags)
mortgage fraud |
Related Stories:
Mortgage Fraud In The News
Mortgage Fraud Part 2 - More Predatory Lending Practices
Mortgage Fraud Part 3 -Two More Predatory Lender Practices
Comments (33)
| What happens if you refi with a company that had good references and then months later your note is sold to another company that starts seemingly bilking you out of extra fees? Such as: "we have found there is an escrow shortage". This should have been found out in the original refi agreement, yes? Then there is, "we need your tax/insurance information in order to pay them in a timely manner", when you never had to provide these items prior to other companies that serviced your loan. Then you go look online and see an endless list of fraud related complaints against this company, including prior and blatant criminal fraud indictments against the company owner, petitions/hearings for the company to be listed as an unfair business within their state etc? I looked up the refi company references prior to using them and so no implications of them dealing with predatory loan service companies. It may be that I am totally uneducated to the process, but I would never have refi'd if I had known there was to be dealings with such a company. Fortunately, I saved all that I borrowed, my home is not an investment. I just worry that after reading some of the seemingly illegal things that this company is doing to others, that they may try to steal my property through some technical loophole of sorts or falsely penalize me somehow. Should I get an attorney to compare the original refi documents to what this company is claiming that I owe after the fact or just to make sure I am not getting taken? |
|
| Above Posted By:
anonymous
| Thu, 3 Apr 2008 23:39:09 EST |
| If a married couple uses martial funds to purchase a home in pa- then only puts one spouses name on the title of the house- can the person on title add another person with out the consent of the spouse, who is off title?
Is pa a dowry state and if so what does that mean pertaining to this situation?
If you can please help me answer this question I would be very grateful! My married husband listed himself as single on the title of our home. Now he has put it in another person's name. WE are going through a divorce. I want to know if he committed Fraud or not. We were married when we purchases the home and are still married today.
Thanks
Elizabeth Kreutzer |
|
| Above Posted By:
Elizabeth Kreutzer
| Mon, 24 Mar 2008 16:47:04 EST |
| Macy: Travelling notary? Sounds fishy. The mortgage broker will have a notary, or any credit union. Sure, you will have to notarize papers, but don't let anyone call you and tell you what to sign. Call the mortgage people, and if you are concerned about their honesty, go to a local credit union and talk to their mortgage folks about the situation. |
|
| Above Posted By:
Dan
| Fri, 1 Feb 2008 09:29:37 EST |
| We are looking in to refinance our home thru a mortgage company. The mortgage guy said he could get us a good deal we told him to get all the paper together send it to us so we can look it over. The next day we get a phone call from a traveling notary. He informed us we need to sign prlim. papers that night asap. Has anyone heard of this before. we decided we are not going to do this because we believe in reading everything first before signing. Especially when someone is in our house looking over us waiting for a paper to be signed. |
|
| Above Posted By:
macy
| Thu, 31 Jan 2008 00:04:09 EST |
| In response to George, Anonymus and Kim: I hope that if you have any knowledge or have suspicions of fraud that you have made a complaint with a law enforcement agency as I have. I am in the real estate profession and have found that there APPEARS to be more unscrupulous behavior amongst mortgage - so-called professionals than real estate sales licensees, however all are responsible if they are not going to be part of the solution. Kim you should make it clear to the state and the public the name of the company for investigation. It's the public including all of us they want to bail out the lenders when infact all monies collected by mortgage professionals should be reclaimed by the defrauded lender as well as jail time for such greedy behavior. THe FBI should be notified ASAP! These criminals should not be allowed to be in our business. One that I know of being reported has Ballard in their name as well I unfortunately suspect we will see more fraud in sales and mortgage amid our condominium market in Houston, Tx , but I hope not. This will only continue to hurt the consumer as well as good and honest professionals such as ourselves. |
|
| Above Posted By:
Anonymous
| Tue, 22 Jan 2008 07:29:27 EST |
| My broker claimed to "be my friend" to not worry, she had everything covered. Moving from California to Texas, I trusted her. She manipulated our credit scores, claimed we were denied through her co, claimed there was no employ. verification, (which there was, I have the proof) says husbands income was all wrote off, (false) then gave us 2 liens, w/ a prepmnt penalty, at not the best rates that we were deserved having excellent credit scores. I reported her to tx dept mortg lending and was refunded over $4,000 back to me that was money she planned on putting in her back pocket, the company is now being watched and monitored closely, and I plan to pursue further legal action against the co. I cannot believe the person I trusted, who I thought was my friend, could stab me in the back like that. It's absolutely digusting. SO I am pursuing my real estate license to treat people how they should be treated in this industry. Also my real estate agent was very much a part of this whole scam, she was paid good at the end. I want a loan that we so greatly deserve. I have a hard time trusting people in real estate to this day and this all happened a year ago this month. Very disturbing!! |
|
| Above Posted By:
angel
| Tue, 8 Jan 2008 21:48:54 EST |
| The Educated Borrower- Your Mortgage Bible is a book that was written by a mortgage industry insider. It divulges exactly how the layman can protect themselves from the hidden secrets and money traps that the mortgage industry would not want the author to reveal. It is a total no holds bar, knowledge filled book that will arm the mortgage borrower. Can be found on the internet at any major book store.com. Highly recommended. |
|
| Above Posted By:
Kristina
| Tue, 11 Dec 2007 08:58:35 EST |
| In answer to "homeloans" you may have a point about people being gullible,however, when people who have real hard copy reciepts go before the local county court and the judge denies their right to even be seen as evidence because he doesn't want to go against what the big corporation wants, it makes one wonder if we still live in the United States. Who changed the rules to: corpration100/John Q.Public 0? How is it that a corporation is allowed to steal a family's paid for home?
|
|
| Above Posted By:
cjh
| Fri, 27 Jul 2007 15:54:12 EST |
| I do not have the greatest credit score and went to Country Wide. I did everything they asked, I cleaned up my credit, I had adequate income. I educated myself and started asking my mortgage officer questions, he did not want to answer, The very last time I spoke to him he told me the underwriter denied my loan because of recent late payments, (I have not had a late payment on anything in 6 years!). I found out later that he never submitted my paperwork to the underwriter. |
|
| Above Posted By:
Anonymous
| Mon, 23 Jul 2007 20:59:05 EST |
Rule 4: Educate yourself and Know your rights. There are loan officers and mortgage people out there who should not be in business. They don't know their products. There are literally hundreds of loan products, many variations off the same ones, which makes learning about them most important. The Option ARM or PickAPay loan is one such example. These 1% to 2% loans are great for the right client, but they can be dangerous in the wrong hands, these loans are not meant for everyone.
There are many more rules I could write, however I believe you understand the basic premise is that we all have a choice in the matter. 1) As consumers, we have rights. We have the right to review our documents and say NO if we have been cheated. 2) As an industry, we have a choice to serve our clients in the best way possible, being upfront, honest and using diligence.The earliest of comments was posted TWO years ago, we can see the aftermath of these events unfolding before us. |
|
| Above Posted By:
homeloans
| Sun, 8 Jul 2007 07:04:06 EST |
Rule 2: Mortgages are Federal and State instruments. They are Federal by their standardized forms. Page 3 of the loan application or 1003 references the US Code for completeness and accuracy of information listed. Appraisals are a Federal document, they cite the same US Code.
Mortgage brokers are heavily licensed in most states, they are examined, reviewed, and audited. Various states impose fines of thousands of dollars for incomplete, inappropriate, and inaccurate disclosures.
Rule 3: If it sounds TOO GOOD to be true, then it probably is. Bait n Switch techniques are paramount to this philosophy. As a mortgage professional I deal with the fallout of other loan officers and brokers lying to the customer and trying to lure them in, only to grab them before they can back out. Customers CAN always back out. Sure, it may cost a little bit of money now but it in the long run that small amount paid to back out will save them thousands, their credit and their home. |
|
| Above Posted By:
homeloans
| Sun, 8 Jul 2007 06:55:27 EST |
| It's truly unfortunate that people only hear what they want, believe it, then they are "shocked" when it wasn't what they thought. Every issued raised on these comments has merit on its own basis, however we need to wake up people.
Rule 1: Read ALL documents before you sign agreeing to the terms of the loan. If you don't understand don't sign, walk away. If you need the money, think twice before signing since it may affect you years later. Lending laws are in place to protect you. |
|
| Above Posted By:
homeloans
| Sun, 8 Jul 2007 06:49:26 EST |
| This is in response to George. SHOW ME!!! |
|
| Above Posted By:
CJH
| Thu, 28 Jun 2007 19:35:01 EST |
| In response to CJH who stated that ALL brokers are to blame. You're a biased idiot who lays blame flatly on all brokers. Obviously, you're trying to steer borrowers in your direction by making such irresponsible & unproffesional comments. I truly believe the borrowers need to stay away from your self-serving tactics. There are many of us in this industry that always try do do the right thing. I won't stand for ill-conceived comments... you're an idiot!!! |
|
| Above Posted By:
George
| Fri, 22 Jun 2007 07:12:16 EST |
| Once your credit is trashed by a lender who holds up payments just so you appear late and then three times you tried to opt for the lender's answer...a balloon payment and an increase of your mortgage payment, once all of your possibilities are taken up, whose going to stick their neck out and lend you enough to save you home? And when the sleezes hire attorney's to foreclose and sue you, you don't even deserve a legal service by mail or in person. Rights? |
|
| Above Posted By:
cjh
| Wed, 18 Apr 2007 15:44:11 EST |
| Most of the problems are caused by Mortgage Brokers. I work for a Direct Lender who is a bank. I am bound by RESPA, FRCA and many other laws and regulations. I also work with the Community Lending that my bank does. Every single borrower that we refi...had their loan originated by a broker.
The fallout has sadly just begun, wait until the news media really figures out how the Option Arm works... I work for one of only 2 major banks that never originated an Option Arm...
I sleep well at nite |
|
| Above Posted By:
Anonymous
| Sat, 7 Apr 2007 02:05:14 EST |
| I am an Escrow Agent and I can tell you from experience that many borrowers don't review the paperwork at closing. The borrowers have so much faith in their broker that some just sign without looking at the documents or listening to what I am telling them. The only thing most borrowers care about is "how much is my payment". There is only so much I can do to help protect them. All borrowers need to be more careful. Take your time, don't let anyone rush you, and know what you are signing! |
|
| Above Posted By:
Kim
| Fri, 6 Apr 2007 07:46:25 EST |
| I worked for a broker shop here in Houston, TX and they were very cool with doing the fraud thing. I have seen the operations manager sign borrower's names to an application, I have seen them create a W2 from a borrower that was 1099, I have seen them tell a borrower that currently owned a house to have a relative to go and file a lien to the property and when they close the loan-that lien would be paid off and they would get cash back and the list goes on.
|
|
| Above Posted By:
Houston, Texas
| Wed, 28 Mar 2007 16:52:12 EST |
| I recently attempted to refi my home through a lender referred by Lending Tree. In a period of 2 weeks I was quoted a vast array of rates and payment amounts on the same basic product. On the day we were set to close, I called my insurance company and found that the escrow quote I received was incorrect. Fortunately I backed out of the deal. But it still cost me $400 for an appraisal about twice the going rate in Michigan. |
|
| Above Posted By:
Anonymous
| Mon, 9 Oct 2006 11:38:31 EST |
| I am a single mother or 2 young boys, I was "taken care of" by the sellers broker, totally trusting and nieve, now one year later, looking at forclosure or bankruptcy...Why? My Loan application, which I was to complete, and god knows who did, stated I made $6800/mo, in fact I make appx $2000/mo...and how do my boys learn of the American dream? Let me ask the broker? Or maybe his children?
|
|
| Above Posted By:
Shannon
| Thu, 5 Oct 2006 17:44:18 EST |
| Wow!!!! As a mortgage professional.... I seek to keep my clients for life...if I screw them... I lose them and some great referrals later..... Ask a lot of questions...if your not satisfied with the answer..... find another broker.... get a referral from a friend who did have a good experience. There are some of us that do provide value. Provide all documentation that the Loan officer requests....and don't take a "phone quote" until your financials are reviewed. |
|
| Above Posted By:
tom
| Fri, 8 Sep 2006 08:09:43 EST |
| As a legitimate and honest non-prime provider no group is more damaged professionally by mortgage con-artists, the type seen on certainLISTs dot coms, than we legitimate providers of non-prime solutions. However, we provide a service that banks and A paper lenders do not which allows home ownership to a segment of our nation not otherwise allowed. Are non-prime loans more expensive? You bet! If you want an A paper rate at A paper pricing, pay your bills ON TIME, never DEFAULT and get EDUCATED. |
|
| Above Posted By:
Novation
| Tue, 22 Aug 2006 14:03:14 EST |
| As a mortgage broker myself let me say sorry for all the negitive experience you had with your mortgage purchases. But there still are very good and honest brokers in the business. |
|
| Above Posted By:
Lexington,Kentucky
| Thu, 27 Jul 2006 10:40:32 EST |
| I had a favorite loan consultant. I desperately needed a loan refi last year after finding out that the seller of my house had sold the house to me with a bad sewer. My favorite loan consultant hit me with $3600 in points the day before signing and lied to me that the loan would only go up once - it goes up every six months according to the market. I am now forced to go into a neg am loan just to keep my house, and this individual couldn't care less. She got her money out of the deal. |
|
| Above Posted By:
Anonymous
| Sun, 16 Jul 2006 20:50:24 EST |
Okay, I agree there are many unscropulus people in the mortgage business. There are also many in the media, doctors, preachers, teachers, politicians, and the list can go on and on. There are also many good loan officers that work to create value and make their clients lives better. Also, ALL lending is based on RISK. If someone has low credit scores, or they are doing a very high risk second mortgage then the risk involved is going to be relected in the rate. That does not make it predatory.
Your charaterization given in your examples basically are saying that because someone markets for business, or works as a lender with a home improvement company, they are crooks. Come on! People need to use common sense. The mortgage business is one of the most heavily regulated business there is. But loan officers have a right to earn an income just like you. You are probably getting paid to write these articles by someone, does that make you evil? (Some might think so.) |
|
| Above Posted By:
Michael
| Fri, 12 May 2006 14:29:47 EST |
| My wife and I were told that we had secured a loan for 1.75% for five years and at that time the mortgage rate would go up 1% a year until it reached 7.75%. The month after we secured the loan we got a notice in the mail that the rate was going to 7.75% immediately, which it did and was sold the following month to Chevy chase Bank. Now we are told that the 1.75 was a "payment rate" and the interest was 1.75% for one month. Our origional morgage amount was fixed at 6%. |
|
| Above Posted By:
Anonymous Robert
| Sun, 19 Mar 2006 08:28:54 EST |
| When I advised broker of the dollar amount I needed to refinance including cash out was not met with the loan he arranged (75%LTV) and that I was looking elseware he
guaranteed me That within 3 months an additional 5% would
be disbursed. The bank said they never said that. This has created a major problem. Phone calls to the broker are ignored. |
|
| Above Posted By:
John Wood
| Sat, 14 Jan 2006 18:17:08 EST |
| I contacted Countrywide Mortgage to refinance a 2nd TD of $27000. I was told by the loan agent it would be $152 per month at 6.75% for a 30yr due in 15 with no closing costs. When I received the loan documents, they had increased the loan to $30,000, with and increased payments to $195 per month and added closing costs of $1200. Plus, they had added loan points that had not been disclosed. They have been non-responsive to my inquiry. |
|
| Above Posted By:
Oregon
| Thu, 5 Jan 2006 17:32:37 EST |
| A good rule of thumb is that if a Mortgage Broker is hitting you with up front fees to keep you committed then run. Application and Lock fees are purely "junk fees" to keep you from jumping ship. If an appraiser enters your home then you are on the hook for his time but you are still not committed to any broker. Borrowers have many laws that are designed to protect them. Don’t be afraid to use them to get the deal you were promised. |
|
| Above Posted By:
Brian Tobin
| Fri, 2 Dec 2005 15:17:28 EST |
Bay area practices: Incentives are given for the riskiest loans so they are heavily pushed on those with poor credit.
One woman who did not qualify for a loan was encouraged to seek out a friend that had a better credit score than hers and see if they could front the loan for her. Oddly she did just that, it was sad.
All the while high-fiving each other when they would score an appointment to bring these people in and close them. (See the Movie Boiler Room and you get the picture)
|
|
| Above Posted By:
california
| Thu, 27 Oct 2005 17:39:20 EST |
| I am currently a victim of the classic I will be in the neighborhood giving free estimates. As it went, I am now trying to get out of going through with this company and getting my money back. There should be more information to the public on how to deal with these people. |
|
| Above Posted By:
anonymous
| Mon, 22 Aug 2005 02:08:14 EST |
| I think it is awful to hear about companies or individuals applying their predatory lending practices to elderly women and men. Whoever is in charge of this industry needs to crack down on this. Put them all in some sort of mortgage fraud database and put it on the interenet for all to read. |
|
| Above Posted By:
Anonymous
| Tue, 16 Aug 2005 17:18:33 EST |
| I was approached by mortgage broker on how I could save money because intrest rates are the lower now than ever and could lower payment and term.We agreed to go 15 years at 6% and summited loan application it was approved on those terms after a lot of delays # months later went to closing every thing had changed it was 8.5% and 30 years plus A ajustable arm intrest rate. when I refused to sign all the paper work they forged my signature and intials in a 100 places and sold loan off |
|
| Above Posted By:
lee
| Fri, 24 Jun 2005 19:34:48 EST |
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