Unpacking Dishonesty in the Mortgage Lending Industry
The home mortgage lending industry has often faced scrutiny over allegations of dishonesty and unethical practices. Debunking these claims, this article delves into the common practices and experiences shared by many borrowers, expanding on the instances of misleading information, hidden fees, and outright lies. We explore the motivations behind such unethical behavior and provide insights into how borrowers can protect themselves.
Common Practices in the Industry
The mortgage lending market is rife with practices that can be considered unethical and misleading. One of the most common issues reported involves loan officers who are motivated by their commission-based earnings. In times of low business, loan officers may resort to dishonest practices to secure a deal. This article aims to shed light on these practices and provide guidance on how to navigate the process with greater clarity.
Lies and Misinformation
The following are some of the most common forms of dishonesty:
Dishonest Approval Letters
Loan officers often claim that an applicant has been approved for a mortgage and provide a closing date in their estimates. However, in reality, many closing dates are subject to change due to various factors such as appraisals or changes in financial information. It is not uncommon for the closing date to be delayed significantly or for the final terms to differ from the initial agreement.
Manipulation of Interest Rates
Interest rates can sometimes be misleading, with discrepancies between the rates advertised and the actual rates offered. This can occur through various tactics, such as promising a certain rate, then changing it at a later stage. Even documented rate locks can be subject to changes if certain parameters are altered.
Extraneous Fees and Hidden Costs
Borrowers have reported being charged hidden fees for services that were never explicitly discussed or agreed upon. These expenses can add significantly to the total cost of the loan, leaving the borrower without an understanding of all the fees involved.
Personal Experiences and Anecdotes
Several borrowers have shared their experiences with unethical practices in the mortgage lending industry. Here are a few incidents:
Rising Rates and Commitment Issues
One borrower, who purchased a home in 1988, faced an issue where the interest rate rose slightly during the escrow period. Just two days before closing, the loan officer required the borrower to provide an original Social Security number to agree to the commitment. To resolve this, the borrower had to engage a lawyer to honor the rate lock.
Hiding Fees and Bogus Charges
A Merrill Lynch advisor claimed to refund $1,500 for locking in the interest rate. However, at closing, the advisor failed to provide the refund and instead added various bogus fees that totaled the amount promised. This demonstrates the potential for hidden fees and misleading financial practices.
Misrepresented Rate Locks
A borrower was promised a locked rate of 4%, but upon reviewing the paperwork, found that the stated rate was actually 4.8%. When confronted, the loan officer claimed that this was a standard procedure and they would still give the borrower the 4% rate. However, the borrower was told that there would be no other lenders willing to work with them, highlighting the deceptive nature of such claims.
Stated Income Loans
Another instance involves a borrower who was given a stated income loan, despite earning a higher income than required. The loan officer admitted to this practice for personal gain, as stated income loans typically offer higher commissions.
Conclusion
The mortgage lending industry has a history of unethical practices, including misleading information, hidden fees, and outright lies. It is crucial for borrowers to be aware of these common practices and take steps to protect themselves. Consulting with a trusted financial advisor and ensuring transparency in all loan documents and communications can help mitigate the risks associated with these practices.