In his Proverbs, King Solomon tells us that prudence, caution and good advice can keep good people out of the clutches of the wicked. “If wisdom shall enter thy heart, and knowledge please thy soul,” he says in Proverbs 3:10-14. “Counsel shall keep thee, and prudence shall preserve thee, that thou mayst be delivered from the evil way, and from the man that speaketh perverse things.”
That’s good advice for today’s homebuyers and investors dealing with the nation’s major mortgage lenders, many of whom have been found guilty of a variety of fraudulent practices in handling applications for mortgages and refinancing. The current suit against Bank of America reveals some typical practices BofA and other lenders have used to manipulate customers and collect more fees. Here are five of these practices, and what you can do about them.
Repeated Requests for Documents
As the ongoing saga of Bank of America’s misdeeds reveals, stalling is a time-honored tactic to draw out the lending process, collect more fees and even force applicants into other kinds of loans. Lenders may not tell applicants upfront what documents they need to supply, or suddenly “find” after several weeks that a key piece of paper is missing. The stalling discourages applicants and allows lenders to keep collecting processing fees.
Long Waits for Approval
Hanging up applications for long periods is another stalling tactic, especially if you’re applying for a loan or refinancing under any of the federally sponsored assistance programs. Although banks act as third party servicers for these programs, the aren’t as lucrative as their own in—house loan products. So after holding am application for a long time, or outright denying it, the bank can then steer an applicant toward other, more expensive in-house products
Hard Sells on In-House Products
Not all mortgage packages are the same. A lender’s own loans may carry higher interest rates than those offered by assistance programs. So mortgage specialists may aggressively push applicants toward those products by telling them that they aren’t qualified for other options or won’t get a loan anywhere else due to credit problems or other issues.
Fuzzy (or No) Explanations
If you can’t get a straight answer, watch out. Lenders should be able to give clear, timely answers to your questions and good explanations for denying your application. Lender’s representatives who don’t contact you within reasonable time frames or respond to repeated phone calls may be stalling.
Threats of Dire Consequences
Lenders may try to strong-arm applicants for mortgages or refinancing with threats of foreclosure if they don’t’ accept a certain loan package or restructuring option. They may try to convince borrowers that they won’t be able to qualify for a loan from any other bank or push additional services that they claim are essential.
What’s a borrower to do? Taking Jason Hartman’s advice is a good first step: stay informed and learn all you can about the process. Check with independent resources about what paperwork is typically needed, or how long it typically takes. Press for specifics on delays and denials. Resist pressure to sign now or accept a deal you don’t understand. Remember that you can always shop around for rates, programs or even just better treatment. And the nation’s big banks are still on probation, so regulatory agencies such as the State Attorney General’s office or the Consumer Financial Protection Bureau are happy to take complaints. (Top image:Flickr/dstrelau)
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The Solomon Success Team