Seven Ways Lenders Lie to Borrowers
March 2, 2016 1:45 PM
Whether it's an intentional bait-and-switch or a misunderstanding on the originator's part about compliance requirements, here are seven things lenders should be careful not to misrepresent when communicating with borrowers. Related: Seven Ways Mortgage Applicants Lie to Lenders
'I'm from the Government'
Lenders funding loans that the government's Federal Housing Administration guarantees are not public entities themselves. But sometimes they may lead borrowers to believe they are. Doing so violates Consumer Financial Protection Bureau rules.
'You Need a Doctor's Note'
Some lenders may tell loan applicants with disabilities that they need to provide a doctor's note to qualify for a Federal Housing Administration loan, but it's not true. Medical records are protected by privacy law and the request is considered a prohibited form of discrimination.
'Don't Expect a Loan While You're Expecting'
Some lenders may tell borrowers that their pregnancy or maternity leave is grounds to deny or delay a loan, but government programs don't allow this.
'Such a Deal'
Lenders that advertise lower rates than they can actually provide violate Consumer Financial Protection Bureau rules.
Seniors 'Can Never Lose Their Homes'
The CFPB calls this claim about reverse mortgages a "misperception." Lenders and counselors should make it clear that if Home Equity Conversion Mortgage borrowers can't fulfill certain requirements of the loan such as a requirement to maintain the property, they can lose their home.
'Sure, We're Licensed'
Even though it's gotten pretty simple to check industry professionals' credentials through the Nationwide Multistate Licensing System & Registry, regulators find some have pretended to have a license when they don't, or cheated on exams that are part of licensing requirements.
Hidden Kickbacks
If a lender has an arrangement involving payments for referring borrowers to other parties and doesn't disclose that to consumers, the CFPB considers that to be deceptive marketing.
