In recent years, mortgage loan officers have developed a nasty reputation for being "sneaky", "sleazy", and just plain "evil" when it comes to their lending practices. The truth is, almost all loan officers are genuinely caring people who really want to help homeowners, and help people become homeowners. However, there are always a few bad eggs, and in this industry, those bad eggs have tarnished the reputation of the trustworthy professionals.

Although most loan officers are good people, there are some bad ones out there, and you should be aware of their dirty tricks in order to protect yourself from them should you encounter them.

The most famous trick is the "bait and switch", whereby a loan officer will lure in a client with the promise of "low rates and fees". Usually they will even lie about the costs of the loan on the good faith estimate and truth-in-lending statement. When the borrower gets to the closing table, they realize that the costs are significantly higher than what they were told. The sad truth is, most people are desperate at this point and go ahead and sign for the loan anyway. They do so because they so badly want the home.

Upcharging is another trick some brokers use to get your money. This is done by overcharging for third party fees. Borrowers should ask to see invoices for appraisals, credit reports and all third party fees to make sure they are not being overcharged.

One way of realizing that you may be involved in a bait and switch is that a one broker is significantly better than any of the others that you have shopped against. You may find yourself in a worse situation after the broker lures you in only to tell you that the bank or mortgage company will not accept the loan at the last minute for such reasons as the credit score dropped adn you may end up with a higher rate and or closing costs than what you would have had in the first place.

Unscrupulous loan officers will often tell you things they know aren't true, especially when they feel they may lose your loan to another loan officer.
One example is a loan officer tells you he can beat another rate you were quoted. Then nothing seems to happen on your loan for 10 days or more. Your closing is delayed by a day or 2 to build your anxiety and desperation. For a purchase, it may even be delayed a day past your contract deadline. The day before, the night before, or even the day of closing, you may be told your credit score dropped, rates went up, your work history isn't long enough, the debt-to-income guidelines changed for your loan program or something similar. Therefore, your rate and payment has gone up.
He will almost always inform you that he took a reduced commission to make your loan work.
However, in most cases, it's late. You're desperate. You figure you don't have the same 2 weeks or more that this loan has taken to find another loan officer. You fell like you've been cheated and there's nothing you can do about it. You sign the closing documents just to get it over with.

Be aware that often loans can be closed in just a few days, particularly when you've already applied and received a quote with another loan officer, as in this example. Earnest money usually must be returned or a purchase contract can be extended if satisfactory financing is not found by the contract deadline. So, a bad situation can often be salvaged.

However, if you do close on the loan and feel cheated, call the original loan officer and tell him he was honest and ethical. Offer to give referral cards to friends and coworkers. Ask to be put on his mailing list for your future refinances and purchases.

 

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