In his superb Washington Post Column, Ken Harney analyzed a little publicized settlement between the FTC and fallen Investment Bank firm Bear Stearns that has implications for the way buyers should get and handle their loans. From the column, the complaint against Bear Stearns’ subsidiary EMC was:
But the FTC’s complaint and settlement on Sept. 9 allege that EMC hit mortgage customers with unauthorized fees, misrepresented how much money they owed, harassed homeowners with debt-collection techniques including “property inspections” that were designed to get collectors into houses illegally, and failed to tell national credit reporting bureaus that borrowers were disputing derogatory reports.
EMC was accused of committing these acts with loans they did not originate, loans they purchased on the secondary market. So you as a consumer could get a loan with a trusted and honest mortgage company, have that loan sold on the secondary market, and then have your loan serviced by a dubious loan servicing company that gives you improper charges and damages your credit rating over charges that you do not really owe:
“Despite indications that loan data obtained from prior loan servicers . . . was likely inaccurate or unverified, EMC nonetheless used that data” to demand principal and interest payments and late fees from customers who didn’t actually owe what they were being charged, the FTC’s complaint said.
What can a home buyer or borrower do to protect themself from these practices?
1. Know the terms of your loan, how much money you owe on the loan, and when penalties apply to your loan. Don’t just assume your lender is right when they send you a bill for a different amount than you think you should pay. Follow up and UNDERSTAND your loan.
2. When you get a new loan, get it from a trusted source that doesn’t resell all of their loans. I’ve written previously on working smart with a loan officer. Frank has this warning on working with internet lenders. The important element in your relationship with a lender is accountability. Take seriously the loan officer that your real estate agent recommends. That loan officer wants to enhance his relationship to your agent by doing a great job for you. Ask any loan officer you work with what percentage of loans they resell. I recommend you favor a mortgage company that keeps most or all of their loans. They can’t promise you your loan will never be sold, but their record will speak for itself.
3. Keep track of your credit rating. If your lender (or anybody) gives you a derogatory comment on your report that isn’t factual, you need to dispute it. Don’t let somebody falsely ruin your credit.