Whenever you’re dealing with big-ticket items—building a log home, for instance—there’s the unfortunate potential an unscrupulous person may take advantage of you. No one’s immune, especially when sophisticated scammers use cunning tricks and clever tactics to deceive, manipulate and exploit unsuspecting buyers and builders.
Think it can’t happen to you? Don’t be so sure. Even the most well-intentioned, savvy consumer has been duped into signing something that didn’t deliver what the seller promised. When it comes to predatory mortgage lenders—and, as recent news reports have shown, they’re out there—they have myriad tricks up their sleeves. It’s important to know what they are if you’re to avoid them.
One weak spot most any scammer attempts to exploit—whether you’re talking about mortgages or any service—is a consumer’s lack of information. Whoever said information is power had it right. Having correct and complete information is powerful protection against being taken advantage of. Not having access to the right information or not doing your homework can put you in a vulnerable position.
If, for example, you don’t know a lot about credit and how important it is, certain lenders may try to assure you that bad credit is no problem. They would be wrong, of course; credit is always an issue. That doesn’t mean not having first-rate credit precludes you from getting a mortgage, but anyone who says that having bad credit isn’t significant is being deceptive, to say the very least.
Not fully understanding how a loan’s payment is determined, yet being pressured to accept it, is another tactic of predatory lenders. Most people have some notion of how much they’re comfortable paying per month for a mortgage. Scammers can often be adept at concealing higher payments that may lurk in the future.
Another warning sign of the unscrupulous lender is the high-pressure approach: “Sign now! You must sign today, or you’ll lose out!” These are words that ought to raise a red flag in your mind. Fast-talking, high-pressure salespeople almost always have something to hide—usually it’s the truth.
Another way to tell whether a prospective lender may be a con artist is when rates and fees appear to be excessively high. If something just doesn’t feel right, if your initial reaction is the shudder of sticker shock, then chances are good that something is the matter.
Likewise, if a lender encourages you to lie on your loan application—“Don’t worry about it, it’s done all the time, trust me”—he or she is acting outside the law. Making false statements on a mortgage application is fraud. And suggesting you do it ought to tell you something about the integrity of the lender.
Perhaps the most outrageous tactic a predatory mortgage lender might attempt comes at the very end of the loan process, the closing table. To your utter surprise and consternation, all your fees and charges are, well, a lot different from what you originally agreed to pay. Surprise: another manipulation on the part of unsavory mortgage lenders.
The sad fact is that underhanded lenders are out there. And they can be adept at preying on the unsuspecting homebuyer or well-meaning homebuilder. Luckily, there are ways to avoid becoming a victim.
That brings me back to the matter of information, having enough of it and understanding it. Shop around. Always. Ask questions if you don’t understand the terms of the loan. Consult someone you trust to examine the documentation. Two heads are always better than one, as they say.
Consistent with shopping around is promising yourself you won’t take the first loan you’re offered. Comparison shopping works when buying patio furniture and automobiles, and it works when seeking a log-home mortgage, too.
Be a skeptic. In other words, don’t take things at their face value without reasonable investigation and critical thinking. Be wary of advertisements that promise “No Credit? No problem!” Sounds too good to be true? You know what that usually means.
This article ran longer in the March 2008 issue of Log Homes Illustrated.
Tracy Keyser is vice president of system-built lending for M&T Bank. She can be reached toll-free at (888) 539-1160.