March 18, 2018
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Mortgage Refinancing Scams - Loan Steering

For a home owner facing financial problems, refinancing could spell trouble. While the majority of lenders operate honestly, there are also predatory lenders out there who don’t care one way or another about you and won’t hesitate to try to rip you off. It’s always a good idea to remain on guard, even when you think you’ve found a trusted loan officer because they’ll have too many opportunities to take advantage of you throughout the loan process. A good way to protect you is to first become knowledgeable about possible underhanded practices. Loan steering is one such tactic that homeowners in crisis need to look out for.

Loan Steering

It’s easy to call this the four R’s—reject, refer, refinance, regret. This is when a bank or other mortgage lender informs a qualified borrower that they’re not qualified for a loan from their particular financial institution. They may tell you it’s because of your income, credit history, or a multitude of other excuses. For some predatory lenders, it may be a routine practice, or just the work of one dishonest employee at a reputable bank. Either way, the “trusted” loan officer refers you to a “friend” at another institution who may be able to “help.”


With your tail between your legs, you reluctantly meet with the new loan officer, but the terms of the loan aren’t so good. The interest rate is much higher than what most mainstream lenders are offering, and the list of fees is endless. Preying on your emotions, the lender has the advantage because you’re so upset about being rejected and fear more of the same from another lender. After you think about it for a day, you begin receiving calls from the lender telling you it’s a great deal for someone in your financial situation and they’ll make it as easy as possible for you.


At this point, other scams can easily come into play:

·        Aggressive and high pressure sales

·        Encouraging a cash-out refinance to pay off debts, stripping you of equity

·        Rolling closing costs into the mortgage, increasing monthly payments

·        Advising to refinance again, at a later date, to get a better deal


Part of the scam is that the two loan officers from the different lending institutions know each other and are partners in their scam. The first one made some money from the second one for the referral.


As you can see, people who are in dire need of money can easily become the victim of mortgage refinancing scams. Don’t be easily fooled by promises of easy money. Prevention is your best defense—take your time, be cautious, research the company, and remember—don’t sign anything before you’ve had the chance to read and understand all the documents.




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