Good Faith Estimate Fraud

A Good Faith Estimate is a legally required mortgage document showing costs, rate, and payment. Believing the Good Faith Estimate reflects truthful, accurate, and guaranteed figures is folly.

Nothing could be further from the truth.

The Good Faith Estimate is manipulated by the loan officer low balling the costs and rate morphing it from a mortgage disclosure into a selling tool. It does not reflect real mortgage rates or actual closing costs.

The Good Faith Estimate is really used to hook you…it’s the “bait” part of the Bait-N-Switch. The same goes for rate quotes you get over the phone.

The “switch” comes at the closing when the client sees the real rate and costs, but by that time it’s too late. On refinances, the loan officer has often talked the borrower into NOT making their mortgage payment for the month, so when the end of month closing comes, they HAVE to sign the refinance.

Why?

Because if they don’t sign the refinance, their old loan will still be in force, and a 30-day late payment will get reported. Being painted into a corner is a common practice to insure the bait-n-switch goes off without a hitch.

If the client is buying a home, they too get painted into a corner forcing them to sign. A moving van at $300 a day is idling in the parking lot, the seller is ready to grab their earnest money and possibly sue if they don’t sign.

So what happens?

They sign…

This bait and switch tactic is illegal in any other industry. The mortgage industry’s argument is since rates change everyday, it would be unfair to hold any loan officer to the numbers shown on his Good Faith Estimate. Like most lies this one has just enough truth to make it believable.

The fact is loan officers do know what the costs are. Companies could guarantee their Good Faith Estimate if they want to (we guarantee our Good Faith Estimate on the day of lock for our Colorado clients).

But most don’t do that.

Originators use this loophole to entice folks with closing costs and rates so low they can’t be delivered.

If you shop by comparing Good Faith Estimates, you are choosing a company or loan officer using a completely fictitious document. Picking a company by the Good Faith Estimate is one of the biggest mistakes a mortgage shopper can make.

I wrote an entire article on shopping by Good Faith Estimate…Best Mortgage Not Found Using Good Faith Estimates.

Finding an ethical mortgage provider is the only way to get a trustworthy Good Faith Estimate. Use The Mortgage Advantage to learn how to find an honest broker in your home town.

Good Luck!

Author: Rob K. Blake
Published December 22, 2007