If you thought the evil "bad guys" had left the mortgage business for greener pastures, think again. The thieves are still out there, ready to separate you from your money. But at the same time, many of us are still not above stretching the truth a little when we are trying to obtain financing.
First, the business bad guys, represented today by the Amerisave Mortgage Corporation, which the Consumer Financial Protection Bureau has ordered to pay $19.3 million for perpetrating a deceptive bait-and-switch scheme on would-be borrowers.
The CFPB found that the Atlanta-based online company, which lends in all 50 states, lured consumers by advertising misleading interest rates, locked them in with costly up-front fees, failed to honor its published rates and then illegally overcharged them for affiliated third-party services.
Here's how it worked, according to the CFPB: Since 2011, the company advertised inaccurate rates and terms in online banner ads and searchable rate tables on third-party websites, inducing consumers to pursue a mortgage with Amerisave. Once at Amerisave's website, the company gave consumers quotes based on an 800 FICO score, even when they had previously entered a score well below 800 on the third-party site that led them to Amerisave in the first place. The result: misleading quotes.
The company also required consumers to pay for an appraisal before it would provide a good-faith estimate, then it ordered the appraisal from an affiliated company. Borrowers weren't told that salient fact until later.
Then, at closing, Amerisave charged its customers for something called "appraisal validation" reports without disclosing that that service was also provided by an affiliated company. They also weren't told the fee was marked up by as much as 900 percent.
In its investigation, the CFPB found that Amerisave and its owner, Patrick Markert, pocketed more than $3 million in indirect profit distributions by overcharging unknowing borrowers. The validation reports cost $20, but Amerisave charged $100, with the $80 windfall finding its way to Markert's wallet.
Markert, by the way, has been ordered to pay an additional $1.5 million personally.
Not all lenders are such scoundrels, of course. Heck, most of them are honest and forthright.
But at the same time, it's your money and you'd better take the necessary precautions to protect it.
"By the time consumers could have discovered the advertised low rates were too good to be true, they had already committed to pay hundreds of dollars," CFPB Director Richard Cordray said in a statement.
Next comes the Ocwen Financial Corporation, which has been called on the carpet by the New York Department of Financial Services. According to an open letter by DFS Superintendent Benjamin Lawsky, Ocwen has been running a "complex arrangement" that "appears designed to funnel as much as $65 million in fees annually from already-distressed homeowners" to an affiliated company for minimal work in providing force-placed insurance.
No charges have been filed, and no guilt has been found -- at least not yet. But Lawsky has asked the company to explain itself. After all, the Federal Housing Finance Agency has banned banks and mortgage servicers from accepting commissions on force-placed policies issued by affiliated companies.
Now this from Interthinx, a provider of risk-mitigation solutions for the financial services industry. Interthinx reports that occupancy fraud, while down somewhat from last year's third quarter, is still significant. At the same time, valuation fraud is on the upswing.
An explanation, as those terms may not mean much to the average Joe: Occupancy fraud is when the would-be borrower says he will occupy the property -- when he has no intention of doing so -- in order to obtain the better rates and terms that are reserved for owner-occupants. And valuation fraud is an attempt to create instant, nonexistant equity in a property by artificially inflating value, then extracting it from the proceeds of a larger loan than would otherwise be granted.
Another report, this one from mortgage giant Fannie Mae, shows an alarming increase in income misrepresentation and a lesser, though no less important, jump in falsification of social security numbers. Put all these together and you have a real catch-22: You cheat me and I'll lie to you.
Occupancy and valuation fraud are typically the province of investor-buyers of foreclosed properties, whereas faking how much the borrower earns is usually a crime perpetrated by individuals.
So, while those of us on this side of the transaction would do well to deal carefully with those on that side, those on that side need to be just as vigilant -- otherwise they'll be taken in by the shady among us. You know who you are.