Predatory Lending - The Mortgage Porter

Latest Telephone Scam

August 1, 2007 by Rhonda Porter Leave a Comment

I often work from my home office. For a while I was getting deluged with phone calls from people with foreign accents telling me that I had applied to obtain a mortgage from them! I quit answering the phone when I don’t recognize the number or if the number is blocked. The calls dwindled.

Here’s the new twist on the same scam…I’ve received a couple of these calls now. The person says they’re from the “National Debt Center”. They go on to say that they represent many of the credit card companies you have debts with (it’s not hard to name a few of the big players and get lucky with guessing a card you may actually have).

Until this afternoon, the phone number was blocked…I just filed a complaint with the Do Not Call site. We are on the DNC list and still get these obnoxious calls. When I informed this caller that we’re on the DNC, she slammed the phone down. Other times, this only seems to be a mental game to callers.

They can sound pretty convincing…they’re crooks. Don’t fall for it. The area code from this caller was 113. Look out.

Filed Under: Predatory Lending

Those Amazing Low Rate Offers to Refi Now in the Mail

June 9, 2007 by Rhonda Porter 1 Comment

Even at our home, we’re getting more and more amazing offers from lenders. Recently one of my clients asked,

"We keep getting info in the mail from some odd place that says that we have a mortgage through Mortgage Masters and that they can reduce our house payment to $900.00 per month. We shred them every time we get them but now I am curious if it is true? It does not have the Mortgage Master logo on it, it just says that they know we have a mortgage balance of $266,000."

It’s amazing how much personal information that you would assume is private, is actually public. Any lender or real estate agent can obtain a fine tuned list from a title insurance company or various other marketing companies for a fee. It’s my opinion that if a Loan Originator has to use "cold marketing" (letters, post cards and phone calls to people they don’t know) to drum up business, it’s because they lack referral and/or repeat business from their past clients. No one wants to work with them or their company again nor refer someone to them…therefore, they must buy leads and mail to strangers (you and me).

Many of these offers are suspect…if it seems too good to be true, it is. Bait and switch tactics of offering low rates like 1% or skipping several months of your mortgage payment are hung out in order to have you call "Slick" at the mortgage company. Often times, the ads will appear as if they are coming from the mortgage company you obtained your financing from (check the very small print at the bottom of the letter). The gimmick marketing may even appear to be from a government agency or as if it’s a "special limited time offer". Chances are, it’s a hoax.

As I mentioned at the beginning of this post, we are personally getting deluged with "amazing offers". I think it’s because we have an adjustable rate mortgage. And, the mortgage marketers know this…many of the pieces we receive state that and have emotional rich phrases such as "stabilize your monthly mortgage payment…it’s urgent to refinance now." Our ARM is fixed for seven years. We have five years left on it. It’s not urgent for us to give up equity for closing cost to have a 30 year fixed mortgage at this time.

Another beauty, which I am going to send in to DFI to see if any actions will take place…came in a gold envelope from the "Department of Public Records" appearing as though it’s a check for $660,000. When you open this piece (of crap…sorry, this bugs me) it claims that the "sponsored lender" is Mortgage Master Service Corporation. I can assure you, this is not true. It also offers us a 1% interest rate and that this loan will fund in 10 days. This piece is from a Consumer Loan Lender. They have different guidelines they abide by than Mortgage Bankers or Mortgage Brokers.

The bottom line is that there are a plethora of mortgage marketers out there who are trying to take advantage of home owners fears of rates adjusting or debts…you name it. Don’t fall for it. If you need help with your mortgage or have any questions, contact a qualified Mortgage Professional.

Hopefully you had a good experience with the person who helped you with your original financing…if not…contact someone you respect and trust for a referral to one. What ever you do, don’t fall for misleading junk you receive in the mail.

UPDATE: If you have misleading advertisements sent to your Washington State home, mail it to:

Enforcement Unit, Division of Consumer Services, DFI, PO Box 41200, Olympia, WA 98504

Filed Under: Predatory Lending, Refinance

Local Mortgage Fraud Exposed

May 16, 2007 by Rhonda Porter 2 Comments

Last night I watched an investigative report on the local evening news about a loan originator who put the hard sell on two brothers to purchase 3 investment homes and now the brothers are having to sell their primary residence in order to try to make ends meet. There was so much wrong to this story that it made my gut turn.

I’m glad that predatory loan originators are being exposed. It’s truly unfortunate that for every one of these LOs, there’s an anxious, gullible borrower on the other end. Here are just a few of the highlights from last nights story :

The LO grossly overstated the buyers income. And according to the buyers, the signature on the loan application was not theirs. Absolute fraud.

The LO was the selling agent, loan originator and the seller (he transferred the property to a family member)…I’m assuming he was the listing agent, too?
The properties were horrible overpriced. According to the report, the brothers bought a property for $605,000 and it’s only worth $400,000.

The brothers state they were shocked at their new mortgage payments when they arrived. Since the loan applications were forged, I’m assuming they had no idea what their payments would be.

Simply googling the loan originators name shows that he has been banned recently from his former career as a stockbroker for "defrauding customers" and trying to "harass and intimidate" a securities investigator.

"He’s a great salesman, I’ll tell you that…and stupid me, and stupid us…for trusting someone with a silver tongue."

It is so important to carefully select the Mortgage Professional you will be working with. This may not be an easy task, you’ll need to do some research. The brothers in this story say that this loan originator is one of their friends!

Google the Loan Originators name. What pops up from the search?
Read the LOs blog. You’d be surprised how you can get a "read" on a LO’s personality and lending style.
Get referrals from your other people you respect.
Get second opinions from other lenders or professionals (such as your CPA, CFP, etc.)

I also have an issue when selling agents are also the loan originator. In my opinion, it’s too self serving and a green light for abuse. The loan originator/real estate agent should only wear one hat during a transaction…not two. This subject deserves a post on it’s own. I wonder if this LO disclosed on the purchase and sale agreement the relationship to the seller?

If it seems too good to be true, it probably is. Owning investment properties can be great. I recommend dipping your toe into that pool slowly. Jumping in with 3 homes (the brothers bought 2 condos and a house for investment) is a certain recipe for disaster when you do not have experience as a landlord. Even if the LO was a decent lender, these were highly risky purchases.

It will be interesting to see how this story unfolds. My first post was about a local mortgage fraud case as well and I’m still waiting to see if this predatory loan originator was able to slither away.

DFI currently shows this LOs license as pending…which probably doesn’t indicate anything at this time since Loan Originators will not be able to take the test until June 1, 2007. DFI is, however, in the process of background checks…so it will be interesting to follow this LOs career and to see if he will be able to continue working as Mortgage Broker or if he can find employment elsewhere in the lending industry that is not licensed by the State of Washington.

Filed Under: Legislation, Predatory Lending, Residential Purchase

Loan Originator Leftovers

May 14, 2007 by Rhonda Porter 2 Comments

A few weeks ago, one of the Real Estate Agents I work with contacted me to review an estimated HUD-1 Settlement Statement. She was the listing agent and was concerned that her seller was being taken advantage of by the Loan Originator. In the purchase and sale agreement, the seller had agreed to pay "up to $10,000 towards allowable closing costs". The origination fee on the estimated HUD…2%!

It appears to me that the loan originator bumped up their origination fee at the last minute when the $10,000 credit surpassed the amount of legit closing costs. The origination was not called a "discount" so I highly doubt the Loan Originator used the excess credit to do the right thing and buy down the buyer’s rate. Especially when the listing agent requested a copy of the good faith estimate or other documentation to support the excessive closing costs. When the Loan Originator left the closing table, they attempted to take all remaining left-overs and scraps…licking their chops.

This greedy act by unscrupulous loan originators happens more often than you would like to know. It’s wrong on so many levels, I don’t know where to start! It’s taking money away from the seller, buyer and not honoring the purchase and sale agreement. What can an agent (listing or selling) do to prevent this from happening to their client?

Here’s just a few ideas:

Get a copy of the buyers Good Faith Estimate (GFE) before the seller agrees to pay closing costs when an offer is being considered.
If you’re the Listing Agent, have your Mortgage Professional review the buyer’s GFE to make sure the cost and rate are within reason.
Don’t use "up to" for closing cost. Have the closing cost be a set figure for the credit. This leaves no question as to what was intended for the buyer.
Review the estimated HUD-1 Settlement Statement prior to closing.
Have the Buyer bring a copy of their Good Faith Estimate and Lock Agreement to their signing appointment. If the rate and closing costs are the same, yet the origination is increased…you’ve got a greedy gobbler for a Loan Originator.
If you find that your Loan Originator (LO) is indeed taking the extra left over closing cost credit, put your foot down. Contact them ASAP or your Real Estate Agent and demand to see the GFE and to have the LO explain their increase in origination.

Everyone loses when a loan originator takes more than they should. If your LO is caught with their hand too deep in the cookie jar, slap it hard!

Filed Under: Escrow and closing, Predatory Lending, Residential Purchase

Borrower Beware

May 7, 2007 by Rhonda Porter 6 Comments

I wasn’t planning this post to be part of my debt series but when I saw the front page of the Seattle Times this morning…the timing is uncanny. Borrower, beware: debt disaster looms as rates rise on easy-money.

This is a tale of a couple who was turned down my many mortgage lenders for zero down financing because they had no savings and $20,000 in credit card debt. They are a common portrait of a subprime home buyer over the past 2-3 years.

I have issues with both their loan originator AND the subprime borrowers in this report.

"The couple signed two mortgages to buy their $246,800 house in July. The first loan, a so-called pick-a-payment loan for 80 percent of the deal, had a variable interest rate. The second mortgage, at 12.5 percent interest, covered the rest. The deal included a pre-payment penalty on the first mortgage, and a balloon payment on the second.

Not long after they signed the loan, [the home buyer] decided to dump her sedentary office job to become a personal fitness trainer. The new job paid less, $7.89 an hour, but she had the opportunity to earn commissions as she brought in clients."

There is nothing wrong with an 80/20 subprime mortgage when it’s structured correctly and the clients understand that they have 2-3 years to prepare for refinancing. This means they need to improve their credit scores (having a mortgage paid on time helps credit scores) and to reduce frivolous spending. They need to be accountable and take a hard look at themselves and their finances. Switching from a fixed income, even if it’s a boring job, to a new career that pays commission is irresponsible as a brand new home owner.

The pick a payment program is negative amortization and is not the best program for anyone with 100% financing, let alone a subprime borrower. In fact, it’s probably the worse program a first time home buyer (subprime or not) could have. They will 9 times out of 10 opt for the lower (deferred interest) payment and not fully grasp what the consequence are when their mortgage recasts at the higher rate and fully amortized payment.

"I had no idea the interest was going to climb like it is — they didn’t tell us that at all," Fultz insisted. "Maybe I wasn’t listening. Maybe I’m not good at words. Negative amortization? I never even heard of that."

Their Loan Originator’s response to this (you might to sit down and put away any sharp objects before you read this):

"I agree, it isn’t explaining it in full… But…it’s explained to the client 47,000 freaking times."

And to top it all off, the Loan Originator, who’s business primarily consist of feasting on subprime buyers says she can’t make her mortgage payments now due to the decline in the subprime market.

The pullback has cratered the business model for brokers like Mills. She used to write 10 to 15 loans a month. In March, she wrote two. In February? None.

"I didn’t make my own mortgage payment this month," [the LO] said in April. "But nobody feels sorry for me."

Oh boy…someone pass me a hanky! This Loan Originator closes 10-15 deals typically a month and I’ll eat a shoe if she’s not making more than 1.5% on each transaction. And a few tight months SHE’s missing her mortgage payment?

Please work with a professional Mortgage Planner. And not the first person who tells you "yes". That type of LO smells your desire to own a home and will take you to the bank. And they will not be there for you after closing…unless you want a new mortgage!

Buyer beware, indeed.

Related post: The Debt Disease: Dollar Buy Dollar

Filed Under: Financial Planning, First Time Home Buyer, Predatory Lending, Residential Purchase, Subprime Lending

Did You Get Your Tax Refund or…

April 18, 2007 by Rhonda Porter 1 Comment

How about something that looks like one? This arrived the other day to our home in a gold envelope looking very much like an income tax refund. Per Washington State law, this form of advertising from a mortgage company is illegal.

That’s just the beginning of what is wrong with this advertisement. This company appears to be offering to refinance our current mortgage plus give us $44,000.35 (don’t forget that 35 cents) cash in hand at the low rate of 2.20% (obviously a negative amortized/deferred interest ARM)! The ad shows two asterisks next to the rate… on the bottom of the flier, there is an * in very fine print disclosing an "APR of 6.90% 30 year loan interest rate may increase after consummation". Duh…ya think? The fine print also shows this lender is licensed in California, not Washington, to provide mortgages.

My point is, whenever a mortgage company has to resort to "cold marketing"… whether that be phone calling or deceitful pieces of mail aimed to look like something other than what it is (such as your IRS refund), they are not worth trusting your largest asset (your home) and debt (your mortgage) with.

I always advise getting a referral from someone you trust. Do your own homework. If it seems too good to be true, it is.

Filed Under: Predatory Lending

Subprime LTVs and Credit Scores

April 11, 2007 by Rhonda Porter 4 Comments

Yesterday I received an email a subprime lender promoting their new loan to value (LTV) limits based on credit scores. I thought it was a good reflection of the current LTV/credit score guidelines for this current market.

100% LTV @ 660 Credit Score

95% LTV @ 580 Credit Score

90% LTV @ 560 Credit Score

85% LTV @ 540 Credit Score

80% LTV @ 520 Credit Score

Interest rates were not provided with the email that I received, however, I would be they’re undesirable.

Someone with a 660 credit score, depending on what their actual credit history and financial portfolio looks likes, should actually be able to obtain other financing besides subprime, such as FHA or a Flex type program.

This is a sharp contrast to what was available a few months ago for subprime borrowers. And I’m amazed at how many phone calls I’m still receiving from people who know they have a credit score in the 500 range wanting zero down who are living paycheck to paycheck. I don’t blame anyone for wanting to own a home, it is touted as the "American Dream". But a 2-3 year prepayment penalty with a double-digit mortgage interest rate, is not.

Filed Under: Credit Scores and Reporting, Predatory Lending, Subprime Lending

How Do You Find an Ethical Lender?

April 4, 2007 by Rhonda Porter 4 Comments

On Rain City Guide, there are often debates that will arise about measuring one’s ethics (usually referring to real estate agents or loan originators). So how do you determine whether or not someone is indeed ethical? You can have a Code of Ethics plastered all over your web site and at your office…but it really doesn’t mean squat unless you do what you say.

As a Certified Mortgage Planning Specialist, I am to adhere to their Code of Ethics or I will lose my CMPS designation. This includes 11 Statements of Commitment and 8 Duties to the Client Codes of Conduct. There are 10 other Codes of Conduct that apply toward fellow CMPS members and the CMPS Institute. It’s pretty elaborate.

The Washington Association of Mortgage Brokers (WAMB), which I am a member of, also has a Code of Ethics. WAMBs Code of Ethics are more "short and sweet" than those of CMPS.

The company I am employed by, Mortgage Master Service Corporation, has their philosophy and goals on our website. And I was a Campfire Girl while in elementary school. (Our troop was the Blue Bird Blue Stars).

Jillayne Schlicke recently did a post on Vacation Mortgage about a local mortgage company who has "ethics in their name" and touts ethics on their web page. However, if you contact them about their "vacation mortgage" which is heavily advertised on the radio, instead of providing information about the mortgage and answering general program questions (I emailed on several occasions inquiring about their vacation mortgage), they want to run your credit and obtain all of your information information to make sure you’re considering the proper mortgage. Hmmm…dangling a vacation from your mortgage payment, then refusing to explain the program so they can offer you a different program…sounds like bait and switch to me. Hardly ethical in spite of all their efforts to promote being an ethical company.

This is why I will always return to relying on referrals from three different sources of individuals whom you respect to select your Mortgage Professional. Such as a friend, co-worker, neighbor, Certified Financial Planner, CPA or Real Estate Agent. Preferably, one who has recently gone through a purchase or refinance transaction themselves. Your referrals have all ready been tested by those you trust.

Unfortunately, you’re not able to submit a Loan Originator to a polygraph test to determine if they’re straight shooters with your best intentions at heart. And, you cannot follow them around 24-7 (legally) to see what types of decisions they make throughout the course of a day. And although the new legislation to have loan originators who work for mortgage brokers licensed (banks such as Washington Mutual, Countrywide and Wells Fargo; and credit unions are excluded from this law) is a start, it’s still no guarantee of the the person’s moral fortitude. At least unsavory LOs who work for brokers will have a license to lose (or, at least they will not be originating loans at a mortgage brokerage).

One of my favorite examples of a "Code of Ethics" is from Les Schwab Tire Company. They promote that they treat clients just like they would their own mother. I browsed through their web site and could not find a posted Code of Ethics…but I guess this is, perhaps my point. They do what they say, it’s not all talk or print. Simple. Funny, I think some of the best things are!

Filed Under: Financial Planning, Legislation, Mortgage, Predatory Lending