Refinancing Scams - Buyer Beware

[daylatedollarshort]

We've had this happen twice this year. We fill out an application, the mortgage lender returns it to us to sign but leaves some assets or income off, saying they aren't needed, then after they've told us are loan was approved and right before closing suddenly they realize they DO need more documents, which means the rate lock period always expires before the close date. Both times this seemed pretty fishy so we pulled the plug. The last time this happened the loan person actually told us that when the locks expire they offer customers the current rates or the lock rate, whichever is worse for the customer! So the rate "locks" aren't real lock with some of these lenders - just ways to reel in more borrowers, some of whom may may go through with a higher rate loan rather than start over with another lender.

DH pointed out it is like the car dealer putting the keys in your hand, and asking if you love the car, then trying to raise the price or financing terms at the last minute when they think you've got your heart set on driving away in a new car that day and won't back out of the deal even with less favorable terms.

Luckily we did find an honest lender to refinance with and everything went smoothly.

 

[qwerty3656]

I just applied for a refinance yesterday (and locked the rate). The Lender removed my retirement assets (IRAs) and said they aren't needed and just create paperwork. Should I be concerned?

 

[daylatedollarshort]

I just applied for a refinance yesterday (and locked the rate). The Lender removed my retirement assets (IRAs) and said they aren't needed and just create paperwork. Should I be concerned?

I don't know for sure since we only have two data points where this happened to us. After the second one, DH noticed the pattern and the similarities to new car dealer tactics. I think the lender that was okay left off some income, but it was something minor.

 

[SD-455]

In most cases (with a competent loan officer/ decent mortgage company) they will use the least amount required in regard to assets that are needed to get loan approval to save effort for both the borrower and the processor/underwriter. In daylatedollarshort's situation, the lender should have extended the lock for 15 days with no charge to the borrowers, not to mention should have realized sooner if not at the beginning that the assets were needed. That's pretty poor that they wanted to you pay the lock extension that was the lenders fault.

 

[daylatedollarshort]

In most cases (with a competent loan officer/ decent mortgage company) they will use the least amount required in regard to assets that are needed to get loan approval to save effort for both the borrower and the processor/underwriter. In daylatedollarshort's situation, the lender should have extended the lock for 15 days with no charge to the borrowers, not to mention should have realized sooner if not at the beginning that the assets were needed. That's pretty poor that they wanted to you pay the lock extension that was the lenders fault.

We didn't pay a lock extension. It seemed to us like they purposely let the lock expire due to some contrived delay, then try to charge prevailing rate if rates went up or the lock rate for the mortgage, whichever is higher. Like tails I win, heads you lose.

 

[donheff]

I had that happen with a trade in on a new car I bought almost 50 years ago. They promised me $500 for the trade. I came in to pick up the car with my check in hand and they suddenly decided the market had changed and my trade in was only worth $200. I raised so much hell the showroom emptied out. I eventually got the deal I was promised.

 

[Teacher Terry]

When my ex wanted to buy me out of the house this happened to him. I had waited 2 months for the loan to close because they were so busy but had great rates. Once the lock was over and the rate was higher they wouldn’t lend him enough to buy me out. At that point we put the house on the market.

 

[athena53]

Not quite the same variety of scam but a lesson in reading the fine print: my mortgage company offered me a cash-out refinance in a mailing. My current balance is only $67K, too low for them to resell on the secondary market, but they'd loan me $167K, with $100K give to me for Blow that Dough purposes, for only another $134/month. How would they accomplish this magic? It wasn't a lower interest rate- my current rate is 3% and this was at 4.5%. They'd be swapping my 15-year loan, due to be paid off 9 years from now, for a 30-year loan.

Ummm, no thanks.

 

[daylatedollarshort]

When my ex wanted to buy me out of the house this happened to him. I had waited 2 months for the loan to close because they were so busy but had great rates. Once the lock was over and the rate was higher they wouldn’t lend him enough to buy me out. At that point we put the house on the market.

Sorry to hear that happened to you and your ex. I read on Reddit about a shady lender who always offered the lowest rates - initially. Then they would drag out the process hoping rates would decline or at least until the lock expires and then they would offer a higher rate, which some borrowers would accept anyway to avoid having to start over.

We were surprised this happened to us with lenders with good reviews on the Costco program and one was even a bank, but in hindsight they operated the same way, only a bit more subtly. Going forward we may just stick to credit unions if we ever refinance again. Even though they don't always have the best rates offered, as nonprofits I suspect they would be less likely to be running scams and that their posted rates are "real" rates they can actually fund and not come on rates just to reel in customers.

 

[Walt34]

Not quite the same variety of scam but a lesson in reading the fine print: my mortgage company offered me a cash-out refinance in a mailing. My current balance is only $67K, too low for them to resell on the secondary market, but they'd loan me $167K, with $100K give to me for Blow that Dough purposes, for only another $134/month. How would they accomplish this magic? It wasn't a lower interest rate- my current rate is 3% and this was at 4.5%. They'd be swapping my 15-year loan, due to be paid off 9 years from now, for a 30-year loan.

Ummm, no thanks.

My "spendarina" SIL would bite on that in a heartbeat.