Warning signs of a crooked lender or broker

The mortgage industry is a jungle.

And in this jungle, you'll find plenty of nasty predators and
lice-infested rodents who are hungry to take advantage of your
inexperience in this new territory.

These animals don't care if you end up bankrupt, lose your home and
all of your hard-earned savings. That would require empathy --
something they lack or have had beaten out of them.

You need to keep this at the forefront of your thoughts when shopping
for a lender. That nice-sounding voice on the other end of the phone
or that smiling face behind the desk could want nothing more than to
pounce on your innocence -- especially if your credit is less than
excellent.

Now that you've been warned of the general danger awaiting you, here's
a list of some specific signs to alert you that you're probably
dealing with a crooked lender or broker:

Bad faith: The Real Estate Settlement Procedures Act requires your
lender to provide you with a good faith estimate of the fees due at
closing within three days after you apply for a loan. If the lender or
broker refuses to provide you a good-faith estimate, or delays
delivery of the good-faith estimate, watch out. An honest lender has
nothing to hide, and will provide you the GFE promptly. The best of
the bunch will give you a GFE based on your pre-qualification
information.

Ridiculously low rates: While these deals look tempting in your local
paper or on signs staked out around your neighborhood, beware! Lenders
or brokers that offer interest rates 2 or 3 percentage points below
the national average are hoping you are a shortsighted,
attention-deficient creature. That "1.95%!" bargain that "beats the
banks" won't be a bargain for long as the interest rate will shoot up
each month until you won't even recognize your monthly payment. Don't
go near these Venus-fly-trap offers.

Ridiculously high rates: Whether you are being charged exorbitant fees
or interest rates is hard to determine.

Check what your lender charges for fees against Bankrate's closing
cost study. The study lists the highest, lowest and average fees that
lenders charge.

If the interest rate is more than 3 percentage points above the
national average, you're probably getting hustled. Borrowers with bad
credit are especially susceptible to this predatory trick. See
MyFico.com's sample interest rates based on your credit score (on the
left side of the page about halfway down).

High pressu If a lender or broker insists that the only way you're
going to get a home loan is with his company, hang up the phone or
walk out of the office. This is a flat-out lie. The mortgage industry
is intensely competitive, and if one company can give you a loan,
there are dozens more out there who would be willing to lend you
money. Always shop around.

Prepayment penalties: In today's market, no borrower should be faced
with prepayment penalties. If your lender even indicates that there
might be some prepayment penalties involved, take your business
elsewhere. Be sure to ask about prepayment penalties, if the lender
doesn't mention them. (Update: This statement refers to conventional
fixed-rate mortgages. There are a variety of adjustable-rate loans and
subprime mortgages with reasonable prepayment penalties attached. I
apologize for any confusion this may have caused.)

Inflate-o-appraisal: If the appraisal of your property value is out of
sync with similar homes in your immediate area (within 1 mile), you
could end up borrowing more than your home is worth. This is a recipe
for disaster if you fall upon tough financial times or need to sell
your house within a few years.

Little white lies: Under the guise of trying to help you, a lender may
suggest that you fudge some of your financial information. Lying on a
mortgage application is considered fraud and could result in criminal
penalties. And, common sense should tell you that if a lender
encourages you to commit fraud, the lender probably has no scruples
about defrauding you.

http://www.bankrate.com/brm/news/rea...ve.asp#crooked


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"Husbands are like fires. They go out if unattended." -- Zsa Zsa Gabor