The bait and switch is one of the oldest cons out there. Mortgage companies originate billions of dollars of loans every month using this con. It doesn’t matter if they are a loan officer or a broker, anyone in the mortgage industry can pull off this scam.
It starts by offering a really low rate. I’m sure you hear the commercials or see the ads in the paper and online….a rate so low you ask yourself, “How can they do that?”
They can’t. But they don’t care. It gets the phone to ring, it gets folks down to their office, and it gets online mortgage applications filled out.
Some bait and switch scams come out during the first or second call with a loan officer. They make up some ridicules reason why you can’t have the rate that was promised on the TV or online. So believing it was your fault, you close the loan at the obviously higher rate they were always going to charge you in the first place.
The more egregious bait and switch con lets you get all the way to the closing thinking you are actually going to get that low rate. People get to the closing table and see an outrageously higher rate (it can be as much as 2 points or more!). Some walk away but sadly many sign because they are backed into a corner.
This con works. Yes, they do lose loans either at the beginning or at closing. However, the ones they do close, have so much profit jammed into the rate it still makes them a ton of money.
They get away with this because the Good Faith Estimate is just that…an estimate. If they made a mistake well then they’re just human right?
Wrong!