Loan Servicing Fraud

March 7, 2010

Need to be very careful with your lender by Filippo

My real estate scam series continues right now with this article dealing with Loan Servicing Fraud. In case you want to know what exactly it is, how to recognize it, or how to protect yourself, read on.

Loan Servicing Fraud only happens if a loan is taken from a lender who is not quite honest, with doubtful background and practices. Usually, or at least most often, this type of fraud occurs with subprime lending. Also, first time buyers might be more endangered.

Simply, after signing all the documents (thus almost unable to change the situation), the borrowers might find out that they need to pay higher monthly payments than they originally agreed on. The additional costs in the monthly payments cover for example fees for insurance, legal fees etc.

Another example is that a consumer applies for a loan when offered certain interest rate – if they apply they are obviously satisfied with the rate. When they start organizing all the necessary documents or even start to do some work around their (hopefully soon to be) property, their lender makes them accept higher rates than it was originally agreed. As the borrower is under pressure, they many times agree, as they are worried they might lose the loan.

Signed documents by Markus Rodder

Thus you all need to be very careful with your lender. It is always good to have a lender whom your family or acquaintances have good experience with, as they already went through the “test of quality” with people you trust. If you really do not know any such lender, you should try to properly check out the one you have found. Search the web to find references about them. If you find many complaints, quickly get a new one. A good, honest lender ought to provide you with documents clearly declaring the amount of the loan together with all the additional fees you might need to pay in the future.

All the payments should be included in the documents right in the beginning, so go through all of them carefully. If you have questions, ask your loan officer and do not stop asking until everything is perfectly clear to you. After you understood everything, look at the documents once more to ensure all the data are correct. If so, then it should be safe to sign the papers and be satisfied with your loan.

You might also like

1. Real Estate Scam Part 2: Home Equity Fraud
2. Loan and Mortgage Prepayment
3. Real Estate Scam – Part 1
4. The Reverse Mortgage: Is This an Option for You?
5. Responsible Canadian Homeowners

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