To invalidate this possible rebuttal
by a bait-and-switch lender, be sure
to provide all facts about the borrower’s finances and background upfront
and document all correspondence via
e-mail. Pose any possible issues or
objections to the lender upfront and
disclose everything.
Identity-theft scams
Identity-theft loan scams are perpetuated by an entity, often located
overseas, that attempts to steal an individual’s personal-identification and
financial information to use illegally.
The scammer tries to get the information required to steal a borrower’s
identity through the ruse of an irresistible loan offer. Some red flags include:
• • Loan terms that seem too good to
be true, such as an interest rate that
is lower than 5 percent or an offer of
a loan term longer than 30 years.
• • An entity that represents itself to be
from the United States, although it
is located overseas.
• • An offer to make a loan quickly,
without the supposed lender requesting the usual upfront information required to make a loan.
• • Requests early in the application
process for sensitive or private information such as Social Security
number, date of birth, or bank information for wiring funds.
These warning signs will help you
recognize identity-theft scammers,
thus protecting your clients from the
potentially devastating effects of having their personal and financial information stolen and used for nefarious
purposes without their knowledge.
Warning signs
How do you avoid becoming a victim of
bridge-lending scams? There is no single foolproof solution other than to find
and use legitimate lenders that you
know and trust. But the task of picking
out the trustworthy lenders from the
scam artists is not easy, and is made
even more challenging because there
is no centralized medium for verifying
the legitimacy of bridge or hard-money
lenders. Many bridge and hard-money
lender lists and directories are available online or in print, but their reliability is difficult to validate, and they
may even lead brokers and borrowers
directly to the loan scammers.
Do your own due diligence on all
lenders to make sure they have a legitimate reputation for closing loans,
and watch for the warning sign of loan
terms that seem too good to be true,
such as an offer that claims a 3 percent
interest rate with a 60-year loan term,
or one where the lender doesn’t require
a downpayment from a borrower on a
purchase transaction. Even in the realm
of bridge financing, terms like this are
simply too good to be true.
Other clues of loan scams are offers
that promise immediate loan approval
with little information requested that
come from someone with an “American-
sounding” name such as Bob or Jim but
include an overseas phone number or
overseas office, or that give monetary
amounts in euros or other non-U.S.
currency. In addition, remember that
typos or grammar errors in e-mails or preapproval letters may be a telling clue.
Beware of lenders that claim to lend
on everything, everywhere. Examples of
this are lenders that claim to make loans
to every state, Canada, Latin America,
Asia and Europe, or those that say they
make every type of loan imaginable
from, say, small-business loans to major
construction loans in Singapore.
What about loan scams that are more
insidious and harder to identify upfront? These are the types of loan offers
you and your clients should watch out
for because they are typically offered
by well-organized, professional groups
that make a lot of money collecting
upfront fees. Always do your due diligence on a lender the way you would in
any real estate or business transaction.
Ask for the names of the companies or
individuals the lender has closed deals
with, and determine if they are first- or
third-party references.
Perform a thorough online search
about these types of lenders to verify
that they have not been involved in any
known loan frauds or scams. Search
online real estate forums and other
community websites for the prospective lender’s name to get feedback
and personal experiences from members of those online communities. You
may want to join some of these communities to follow up with community
members about their experiences with
particular lenders. You may discover
some enlightening or even disturbing
information this way.
Common-sense precautions
Because the victims of loan scams
have no means to file formal complaints or take legal action against
the perpetrators of the scams, upfront
detection and avoidance of potential
scams is especially important.
Remember a few common-sense
guidelines to stay out of the traps loan
scammers set:
• • Reality check. Any loan offer that
seems too good to be true usually is.
• • Intuition. Always follow your gut
when it comes to giving an unknown
entity any kind of upfront fee.
• • Lender list. Build your own list of legitimate, verified bridge lenders that
you trust.
• • Relationships. Grow relationships
with your chosen bridge lenders
and get to know their processes and
procedures.
Bridge and hard-money lending remain important financing options for
mortgage professionals and their clients, especially with financing from
banks and other conventional lenders
often not being realistic options for
borrowers. With an understanding of
how to detect and steer clear of possible bridge-lending scams, you and
your clients will avoid heading down
the path toward a loan scam. •
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