Knowing if your lender or investor is a fraud

5 Replies

Hello BP community,

I find that there are lots of sub-par companies and people out there and from our initial conversations with certain lenders or investors, I suspect them of being fraudulent.  Their emails feel copy pasted, there are lots of spelling errors, terms seem too favorable, requirements are vague, etc...

Does anyone have constructive advice on how to weed out potential lenders and investors or does anyone have any experience with a fraudulent investor/lender and wouldn't mind sharing their story?

Note that this is not applying to institutional money as that is easily verifiable. 

Originally posted by @Michael Roman :

Hello BP community,

I find that there are lots of sub-par companies and people out there and from our initial conversations with certain lenders or investors, I suspect them of being fraudulent.  Their emails feel copy pasted, there are lots of spelling errors, terms seem too favorable, requirements are vague, etc...

Does anyone have constructive advice on how to weed out potential lenders and investors or does anyone have any experience with a fraudulent investor/lender and wouldn't mind sharing their story?

Note that this is not applying to institutional money as that is easily verifiable. 

 Look up their NMLS or real estate broker license number for a good starting point that'll weed out 90% of the scammers.

For NMLS, it's centralized: http://www.nmlsconsumeraccess.org/

Some private/HML type lending, depending on state, will be under the auspices of the state real estate broker licensing entity. So it'll vary by state. A lot of legit HMLs in California are real estate brokers, not licensed lenders, and this is acceptable in California.

Not having an NMLS or real estate broker license doesn't automatically mean that what they are doing is illegal since there are provisions for one-off mortgage lending by unlicensed individuals (lending your nephew money to finish the garage being a good example), but there's about a 95% certainty that if you're doing it for a living and/or actively putting yourself out there as a mortgage lender of any form (like if they are doing enough volume that they use email templates...), you are supposed to be licensed.

Another flag is anyone asking for up-front fees before you're even in escrow, or fees once in escrow that exceed a normal appraisal cost.

If BOTH of these tests fail -- no license AND up-front fees -- they're almost certainly a scammer. And the only reason I'm writing "almost certainly" instead of "certainly" is because I don't want to waste time on an internet argument with someone who thinks they are the exception because xyz and abc. 

EDIT: Oh, you're in Canada. I have no idea what the norms are in Canada. If you're looking at US real estate, here's a list of foreign national lenders.... Scottsman Guide is 'meh,' but not at all known for illegal activity. 

As a realtor I do not even accept out of town, internet preapproval letters, or lenders from out of town. 

It must be a major name lender or a local mortgage brokers with good reputation. 

Investors?  I need to screen his profile. Where is your bank statement? Credit rpts, crime background report?


Thank you @Chris Mason for your insight.  I really appreciate it.  We are partly looking at US entities to invest/lend in Canada since the exchange rate is so preferable and that since there are still deals to be had in Canada as the market is not as "red hot" as in the US.