Knowing When You’re Prey for Predatory Loans – Guest Post
Loan companies are a lot like velociraptors. By the time you can say “clever girl,” it’s already too late and you’re underwater on your mortgage. Regardless of whether you’re currently looking for a new loan or are seeking to modify an existing one, no one wants to be a victim of a predatory loan. There are many companies out there using less than honest tactics to gain your “business,” so if you don’t want to be a victim of a bad loan, be sure to keep an eye out for loan companies claiming to be:
1. Extremely fast.
No, I don’t mean officers that ask you out to dinner right after they learn your name. Many sketchy loan companies will make claims that they can get you approved for a loan modification or restructuring within several hours… this is a huge red flag, since virtually all lenders require 24 hours to one week to fill out the paperwork and post a third party authorization. If a loan officer claims they can do this within a few hours, they either work in the same building as your lender, have no business at all (another red flag), or are lying to you.
2. Have access to your lender’s underwriters.
Some loan companies will claim to have access to the under writers of your loan, giving you the false hope that they may be able to “re-write” some of the terms. Unless your loan officer personally knows the underwriter of your loan (was bunk mates with him in prison, etc.), this is a sure sign that you’re being lied to. Not only do underwriters have nothing to do with loan modification, but are required by law to carry their own Errors & Omission insurance, which pretty much takes away any leverage a loan officer could use against them… assuming they even had access to one.
3. Are government-backed.
It’s very easy to make the assumption that since something is associated with the government, it’s trustworthy and legitimate. Predatory loan companies know this, which is why some will claim to be federally chartered in a cheap attempt to gain your trust. This not to be confused with a company that, for example, is participating in government backed programs such as the Home Affordable Refinance Program, selling HARP loans, however. Although government backed loans are currently no more regulated than non government backed ones, the Obama administration is working on instituting more guidelines and rules for companies whom choose to participate in these programs.
4. Can reduce your principal balance.
Although any decent loan company will try to reduce your principal balance, the key word here is “try.” Lenders are in no way obligated to reduce your principal unless federally mandated (bankruptcy, audit, etc.). A good loan company will not only build a solid case for a reduction in your principal balance but will also employ other methods such as the law to gain leverage over your lender. This brings us to our last scammer: loan officers that…
5. Have an in-house attorney.
Now don’t get me wrong… I’m not suggesting that any company that uses an attorney is fraudulent… I’m saying to be weary of any claims that they may make about what their attorney can do for you. Some places will lead you to believe that their lawyer has extra muscle/influence to modify your loan, or has access to some esoteric legal knowledge that can force your lender to magically drop your principal balance. While attorneys can threaten your lender with a loan/mortgage audit in the pursuit of gaining some leverage, any well trained loan modification firm can do the same for you, saving you thousands of dollars in legal fees. Also, there’s no guarantee a violation will be found, so there’s a good chance you may just waste time and money.
Remember, your lender is in no way obligated to do anything to your loan… it’s up to you to find a company that will build a solid case and fight for you.
Charlie Shavargo is a Southern California based writer, former real estate professional. He now maintains a real estate blog and does freelance writing. His work on real estate has appeared in Inland Empire Magazine.