It’s a Sad State of affairs when corruption and illegality become the norm in an industry that is already very highly regulated. The Question becomes one of enforcement. A Google search on Mortgage Bait and switch will return nearly 68,000 results. So what’s wrong?
Since 2010 when Dodd-Frank began to take effect literally thousands of regulations have been implemented and hundreds of thousands of Loan Officers have left the industry. Many tout that the industry has cleaned up it’s act. While it is true that regulators are catching and convicting many that have committed crimes it is a plain fact that regulators are simply overwhelmed and have to triage who gets prosecuted.
Technology aids in the Bait and Switch game
In a recent National Newsletter for Finance Company CEO’s and regulators it was revealed from the inside how consumers are scammed on a daily basis.
The letter begins: “Regarding last week’s observation by a regulator that perhaps the [online] rates weren’t quite accurate, I received a few notes. “I worked for a mortgage banker that advertised heavily on [online sites]. The company’s policy was to advertise rates that were lower, sometimes far lower, than what was on the rate sheet. The loan officers were informed, via email, of the rates we were advertising on [online] and how they compared to our real rates. The loan officers were instructed to do whatever it took not to lock at the “[online advertised] rate,” a rate at which we’d break even or lose money. Few if any borrowers ever got the advertised rate ([I]never saw it happen), and the company was successful in locking enough customers [at a higher rate] to keep the advertising profitable despite the bait and switch ([because]you pay every time a borrower clicks on your ad). I believe this is how many lenders on [online sites] operate.
“This is by no means a new problem. [Although many online sites “try”] … to police deceptive advertising in two ways. The first is mystery shoppers. If a lender fails to honor the advertised rate for a mystery shopper, the lender will get suspended from [the online site]. However, these people are forced to follow an obvious script and the loan officers [telephone order takers] are trained to recognize it. My company was always successful at dealing with mystery shoppers and was never suspended, and I would imagine this is a typical experience. Second, [online sites] encourages lenders to sync up their pricing engine, which would theoretically eliminate the ability to lie. However, it does not force them, and my company uploaded its rates via a spreadsheet, filling in the lowest rates that we thought we could get away with.
“For the most part, that’s what I believe is happening [on all online sites], and from what I’ve seen it happens anywhere that rates are openly advertised. [Although some sites] force you to sync up your pricing engine – there are ways to game that too, and they’re not hard to figure out. I believe that if push came to shove, lenders who are cheating on [online sites] would be dead to rights if a regulator looked into the matter – there’s simply too much evidence. It’d be a little harder to nail a lender for fraudulent advertising on [on sites that make you link pricing engine], though not much harder. The cheating is bad for consumers, and no doubt it’s frustrating for lenders who play it straight, but the cheaters are playing a very, very dangerous game given the current regulatory environment.”
5 Steps to to stop yourself from being scammed
- Deal with a Loan officer that resides and is licensed in your state
- Deal with only a Licensed Loan officer. Nearly every online service you use will have you speaking to an hourly or commissioned telemarketer who is not a licensed loan officer. Would you trust an unlicensed physician or a 1st year nursing student to remove your appendix?
- Read your disclosures and contact your loan officer to answer your questions. Many loan officers play tricks with those too.
- Don’t assume anything unless you have your official loan disclosures with a property address that you have a binding contract on listed there. If they are not official worksheets then they are not worth the paper they are printed on.
- Always Ask Questions before and after the close. Mortgage Regulations change so fast every day that even the most competent Loan Officer can’t inform you of everything that may possibly potentially impact your loan. Yes you read that right. Things can be that vague because once a regulation is implemented there may be legal challenges and court decisions that can modify or otherwise alter a standing rule.
If you’ve read this far a bit of bonus advice is to use a Loan officer that does more than pass their annual Continuing education requirement. Deal with only Certified Mortgage Planners or Advisers. That level of certification will get you honest educates answers and a loan that is in you and your family’s needs in mind now and in the future. These professionals are not order takers and will be with you for the entire process.