MORTGAGE SCAMS

There is a sales tactic in the Arizona mortgage industry known as the “bait and switch”. And if you as the consumer are not careful, it may cost you hundreds or even thousands of dollars.

A “Good Faith Estimate” or “GFE” is a written estimate of closing costs the borrower will most likely have to pay based on common practices during loan refinancing. Under the Real Estate Settlement Procedures Act (RESPA), a lender must provide this disclosure to the borrower within three days of receiving a loan application. Even though your Loan Officer must provide this disclosure to you, there is no law stating that he or she must deliver these exact terms to you at settlement when completing an Arizona refinance or purchase loan.

When the Loan Officer receives your signed disclosures with the terms listed, usually he or she will go back and change these terms based on criteria such as loan to value, income verification, credit history, etc. There are many variables that determine loan qualifications, any of which can be leveraged against you as the borrower. Especially if you have already invested money into an appraisal and are too far along in the process to turn back. This is the classic bait and switch and it goes on frequently with the Arizona mortgage industry.

This can all be avoided by doing some back end research. If you are in the market to refinance, go to multiple lenders and see what each has to offer. Once you narrow it down to one or two refinancing options that seem competitive and reputable, make your final decision on who you feel most comfortable with based on service. Once they provide the GFE and it seems within reason, be sure to hold the Loan Officer to these terms provided on the GFE. Also, ask who the lender is that will provide the funding on the loan and be sure your Loan Officer shows you a rate sheet from the lender which provides a breakdown of how the rate was generated.

Understand that your Loan Officer is going to make money on your loan. Most likely, one percent in origination fee(the front) and one percent in yield spread(the back). So don’t be surprised if you are not getting a “par” rate, which would be the lowest rate a mortgage company could offer.

The Arizona refinance industry is one of the most competitive in the nation and mortgage companies are in business to make money. Nobody will give you a loan for free, just as you wouldn’t go to work for free. However, if you do enough research and are educated going into the loan process, you should be able to walk away with a fair deal and feel good that you’ve worked with an ethical Loan Officer.