Image courtesy of Flickr, Helen Gordon
Lending standards are tighter today because of what happened almost a decade ago. But that doesn't mean there aren't still unethical loan officers out there.
Lending standards are tighter today because of what happened almost a decade ago. But that doesn't mean there aren't still unethical loan officers out there. Some unethical loan officers might doctor loan documents so that applicants will be approved. Or they might charge a lot of money to loan applicants to fill out the mortgage forms.
Tyler Harman, a former loan officer, had unethical experiences with both lenders he worked for. ''It should not come as a surprise, but you are encouraged and rated as a salesperson based on how many applications you take and how many of those ultimately close,'' he says. ''It's a numbers game, and the more applications you take, the more closings you will have.''
There's nothing unethical about trying to get people to take out a loan with you. What is unethical is this: ''A lot of loan officers will take an application they have no intention of closing,'' says Harman. The problem is that sales offices are set up to encourage this. ''Managers reward top producers.'' So sales staff ''Compete on how many applications they can take in a day and how many loans they can close in a month.''
But Harman did not feel comfortable with that practice. ''I would turn away more people for loans than I would take,'' he says. ''Sounds funny for a salesman, but I don't want to waste their time while they're searching for a loan, and I definitely don't want to waste my time, taking an hour on a loan application, then committing the loan, ordering the appraisal, and two weeks later have them be denied or have serious issues with the loan. These competitive mortgage agents aren't doing anyone any favors by telling clients what they want to hear".
Harman says to find a lender who'll be upfront with you. An ethical lender will explain the ways your application might be problematic and what you can do to have a stronger application. ''You get one real shot to get a loan,'' he says.
If the advice you get from a loan officer sounds wrong, it probably is. Mark Aselstine has a story about what happened to family members. ''My in-laws are retired and are looking to put their home into a trust. They approached their loan officer about how that might affect their mortgage and what steps they should take.''
Aselstine's in-laws received some odd answers: The loan officer, in response to their question, said he wasn't sure and that ''They should just put [the house] into the trust and not tell the lender.''
''It's hard to tell during the normal practice of getting a home loan who the true professionals are,'' says Aselstine.
Not all loan officers are professional. Therefore, it's a good idea to contact two or three loan officers before you take out a mortgage loan. You can compare loan officers by asking the following:
You should choose a loan officer you feel good about. You should trust this person and be able to reach this person easily if you have questions. If you feel pressured, look for someone else.
Reverse mortgages are legitimate loan products for homeowners 62 and older who have equity in their home. They use their equity to take cash from the home. Many scams have been associated with reverse mortgages, so the Department of Housing and Urban Development, in 2013, made some rules to help protect borrowers. The rules include not allowing borrowers to take out the entire amount the first year and requiring borrowers to prove they can pay the expenses still associated with the home.
But some unethical loan practices still exist. For example, some unethical loan officers might push the product to seniors who don't really need it, maybe to invest money or to make home improvements. Or loan officers might tell borrowers that they can get them more money than other lenders can. They might do this by writing the closing date within six months of the borrower's birthday, even if it isn't, so that it appears the borrower is older and qualifies for more. The truth is that borrowers qualify based on HUD calculations, and they are the same with each lender.
All borrowers need to meet with a counselor now before they take out a reverse mortgage, and everyone has three days to back out of the deal if they later determine the reverse mortgage was a bad idea for them.
Getting a mortgage is a big deal. It's important that you find a loan officer you can trust and one you feel comfortable doing business with. If you shop for a mortgage with BeSmartee, you can speak with several loan officers before you commit to a loan. One of the goals of BeSmartee is transparency: You'll know everything you need to know before you commit to the loan.
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