Lender Scams and Warning Signs: Beware & Protect Yourself!
Joshua D.Pro Member
BiggerPockets Founder · HI · Member since 2008 · 16k+ posts · 5k+ votesAnother recent thread on this forum caught my attention, and I thought it important to post this discussion . . .
I'd like to get feedback from our members, including the investors, professionals, and lenders about lender scams that might be out there.
If you've aware of ANY kind of scam or scandalous practice that traditional, private, or hard money lenders are currently engaging in, please share them here. I'd like this thread to hopefully become the go-to place to find out how not to get screwed when it comes to getting a loan.
So . . . lets see what you've got to say:
There are many red flags. Basically as Charles mentioned, if you get a feeling a lender (broker, HML) is telling you what you want to hear before your pay the application fees, taht's the first red flag.
You need a B.S. Meter in this business. The better something sounds that is contrary to the norm, your BS Meter should sound off and light up. While everyone, to a degree has a BS Meter (most people get one in junior highschool and it is developed with common sence over time) some have units that need to be calibrated.
The best way to calibrate your BS Meter is to study the subject in a conventional manner. The best way to do that is study real estate financing rules and regualtions, really boring stuff, but that's the way it is. Just because someone says they have a degree in finance or they passed a mortgage brokerage exam or even a bar exam, does not give them credibility in real estate financing. The subject is not taught in depth in any formal educational program.
Pay particular attention to what is known as "prudent lending practices". These are the conventionally accepted norms ofoperations that any prudent lender would follow in making a real estate loan. If someone says they can get financing under terms or conditions that do not follow these guidelines (which is possible) expect to pay more in fees and interest rates to compensate for the additional risks associated with these variances from the norm.
What would you do if you were a lender? Would you make a loan like the one being described to you?
Those who usually get ripped off are those who are desperate. They have poor credit or insufficient capital, maybe both. But the biggest reason people get ripped off is because they don't know any better! They are willing to trust those who tell them what they want to hear. They turn their BS Meter off.
There is an old saying: Financing is the key to real estate that opens doors for you. And, if you really don't understand real estate financing then you really can't understand real estate!
The biggest problem I see for many investors is that begin by listening to guru programs orfollowing the advice of other investors as they insist on skipping the basics and diving straight into something they see as having a profit potential. They fail to accomplish any due diligence with themselves. As fast as rules, regulations and laws are changing today, following the advice of another investor might just take you down a road to make the same mistakes that investor makes and your mentor may not know the difference. What I'm saying is that it is up to you to calibrate your BS Meter.
Your BS Meter should go off as any lender presents something that varies from the norm, they further away they get, the louder it should be blasting in your head!
Some (not all) of the indicators could be:
Up front loan fees that are outside the norm for the type and loan amount you are seeking; and
Not providing a loan committment in a timely manner. This means a good committment that is not contingent on verifications or committee reviews!
Only having one qualified appraiser to appraise a property. If the applicant is paying for an appraisal, there should not be an "in-house" appraiser. And,
Loan fees should be estimated at the time of application, even in commercial deals!!!!! If that lender has been making SBA loans, they know about what an environmental report will cost. They will know what bond fees will be and what underwriting fees will be by the investor.
Residential properties (owner or non-owner occupied) may vary widely from one region to another. Brokers are nowrequired to disclose premiums received as well as all other loan costs in a Good Faith Estimate of Loan Costs.
I have seen people call foul when the per diem interest was estimated at some two digit figure and then end up being in the high three digits. This is not a scam, it depends on the actual closing takes place. Lenders should be using 15 or 30 days.
Borrowers need to get a signed estimate of costs at the time of application.
Borrowers should give brokers or lenders instructions, that all verifications and credit should be approved prior to spending moneyon any appriasal, but often schedules won't allow this as it could be weeks before an appraisal is completed. If the borrower is aware that there are credit problems, credit should be viewed first before spending other loan fees.
Loan scams are usually found by big name lenders who provide loans on line. Quicken Loans runs a shaddy practice.
They require you to submit a credit card number to pay for the fees before speaking with a loan originator. The originator is pretty much a sales person to "get the ball rolling". People have called back within minutes of the on line application to stop the process and the originator did not stop anything. You have a ding on your credit card for $500.00 which is non-refundable. Even after being assured your loan request is terminated or cancelled, a few days later you might see someone stop in front of the property and take a picture from their car. You just had your property appraised!
As to the BBB, that is absolutely worthless. The BBB only tells you if anyone has filed a complaint, not that the company is in good standing. The clerk at the BBB may not even tell you the truth either, especially if ABC Bank is amember and provides hefty contributions to the office party! Pure politics!
Call the Attorney General's Office and the local prosecutors office and see if they have any actions against them. Call the local police department and ask for the fraud division and ask them if thatname has crossed their desk! They are not to discuss any ongoing investigations, but many times a detective will say something like "I wouldn't go there if it were me". Check court records by name. Now, in fairness, a large bank or lender may have several cases so you have to consider the amount of business they conduct and understand that if they file a floreclosure action, the borrower may have filed a counter suit. But not finding your lender there might be a good thing.
But the best way to no when you are dealing with pure BS, is knowing what is definitely not BS, that would be programs that sound like they conform to prudent lending practices, rules, regulations and laws!
Sorry it's so long!
I have been hit up by a group called filga finciaial company.
Tom Vichi emailed a bogus word document and was calling it a loan application. Looks more like a generic rental application than official application. Also puts in there that they demand prompt response and will provide proof of funds to so loan capacity.
Look out for anyone refering you to this person. There are some hits about this on BP.
Hope this helps out
As a newbie, I have not gone down that path of seeking any loans yet, however, thanks to all the insight being shared here, I, now, know some of the things I need to be weary of. I knew there were plenty of scams to be aware of, I just didn't know to what degree.
To all of you, thanks so much for sharing your knowledge and wisdom.
"Where there is smoke, fire is not too far behind". There are numerous statements regarding in this industry. We have to simply do our due diligence to inspect a company before proceeding with any funding opportunities.
I totally agree with the previous posts about being wary of upfront fees. We've been lending since 2002 and have managed to set up a process where we don't charge any upfront fees (not even an appraisal fee - I go out of pocket to do my own valuations) so that we aren't making any money at all until a loan is funded. It keeps the conversation honest, cuts out the frustration of an appraiser's (sometimes incorrect) opinion of value, and aligns incentives so that everyone wants to get to the table quickly. My fall through rate with borrowers is incredibly low, so what do I need to charge upfront fees for?
Has anyone worked with Axiom Captol? They have contacted me and I want to make sure they are legit.
This post is still so relevant and important for us newbies. It is a good reminder to always check the sources, keep your BS radar on and if your gut is saying something is not right put on the brakes!
Thanks everyone for sharing!
have anyone did business with Samuel Robert Castillo , lex loans?
I posted a request for funding in BP market place the next day I was contacted by 2 scammers. One lady not sure what her real name is but she is operating under the business name Axiom Capital Group and not the one in Boston. They wanted $350 up front. The email she sent me she used the signature for someone who actually work at Axiom her name was Marlene in the body of the email but her email signature was Laverne Hypolite. Their website was just built in 2015. The application she wanted me to fill out for funding was a FHA loan application. The other person was from "Big Smiles" company a Steven Sill he was doing the whole rehab at 2% interest a month. The loan application was a joke and he had some other name in his email signature as well. Sad that people do this crap
Watch out for a guy named Daniel Rogers claiming to be from Affiliated Mortgage lending.
I know the company is legit and does some real estate lending, but only in TX. This scammer is using their names, license numbers, all their business information and documentation, except for the phone number. I talked with a company rep and told them about this and he said they are getting calls from all over the US about these "loans".
Not sure if Daniel Rogers is the same guy I looked up on BP, since that's where he said he found my profile. The Daniel on BP has NO information in his profile except for some website.
BEWARE!!!
Hello everyone and I hope this posts helps. I have been a real estate investor and lender for 24 years now. I think I have seen and heard it all.
1. If a lender ever asks you for a "Good Faith" Deposit - Run Its a Scam
2. Lets do the transaction out of escrow
3. Appraisals/Inspections upfront are fairly customary and standard to pay up front by borrower.
4. Complicated Loan Terms is a Red Flag something isn't right.
5. Trust your gut instinct. It is sounds too good to be true, it usually is or everyone would be doing it.
6. Hard / Private Money lenders usually do their own CMAs and Inspections before they even get to an appraisers. Plus many use their own Inspectors and Appraisers. Especially after the 2001-2008 scams where appraisers, inspections, real estate agents/brokers were all in bed with borrowers scamming lenders.
I have been chatting with a fellow investor about the possibilities of doing joint venture buy and holds. He proposed the idea of using LOCs to fund buy and hold deals and rehabs.
I think that it is great idea. You have the power of a cash buyer as a new investor. So I met with a company he recommended to help me obtain lines of credit.
They said they they could use their strong relationships with the banks to get me the funds I need through a variety of LOCs and credit cards. (When I first went in, I was under the impression that it was one LOC. )
Not a bad gig for someone who doesn't have good credit, they also offer credit repair. However, I am 22 years old and have worked very hard to establish great credit.
Here is my dilemma: simultaneous to me trying to jumpstart my real estate investing career, I have also been trying to purchase a single-family home as a primary residence for my family. If I were to move forward with this company, it would create several inquiries on my credit that could damage my score and effect the possibilities of me closing on my primary residence. Not only that, but since I'm using traditional financing through my VA loan for my primary residence, the lines of credit would ruin my DTI ratio and disqualify me on my pre approved amount .
The investor I'm looking to do business with recommended I wait on purchasing my primary residence, and go for the lines of credit first so I can start a few deals.
I'm looking to do whatever I can to start doing deals as soon as possible, but I can't afford to jeopardize my family's primary residence. Our current living situation isn't working very well for us, so I'm trying to purchase our primary residence as soon as possible. On the other hand if I were to wait , I'm not exactly interested in paying other peoples mortgages in the meantime.
I'm definitely open to new ideas and creative financing, but I do not want to screw things up for my family's living situation.
Back to the company, for their services of obtaining multiple lines of credit they charge a 10% success fee. Meanings they apply for the lines of credit and credit cards for me, and I pay 10% of whatever amount they can get for me. For example, if they were able to obtain $100,000 worth of credit lines, I would have to pay them $10,000 on the back end, whether I used the credit or not.
I'm curious to know if there are any other investors out there who have went through a similar process to get started?
At this point, after hearing what the company had to say, I began thinking to myself why can't I just go out and do it myself? I know it's all about relationships and knowledge of the bank, but how important is the relationship?
Is there any reason I can't just do my homework to figure out what banks are looking for when applying for a line of credit and do it myself? I'd like to think I'm a pretty diligent guy .
When I asked the investor I am looking to do joint ventures with, he said I wouldn't be able to obtain that level of credit from banks on my own.
On the other hand, in BiggerPockets podcast 137 Sam Craven was mentioning it's all about how you present yourself to the bank. If your professional, have a project plan, a business plan and make the banks feel comfortable with what you are doing then you shouldn't have a problem.
I hope somebody here can give me insight on my situation. I want to make informed, well analyzed decision.
Like I mentioned before, I am open to trying new things and not opposed to creative financing ideas, I just want third party input as a sanity check. Both the investor and the company seems very transparent about their intentions and seem like good people. But I will feel more comfortable with a 3rd party input.
I'm trying to figure out if this the risk is worth the return. My biggest interest in real estate investing is wholesaling, & I feel like putting my money and efforts into wholesaling could set me up better for buying hold deals down the line.
Keywords: financing, loc, banks, buy and hold, Chicago, Lombard, Illinois, Credit.
Ha! Just last week I had a guy from BP here named Eric Davies (assume not his real name) claiming to be a private investor, offered to fund me. I wont go into all the details, but suffice it to say, if it sounds to good to be true, it usually is. He has been banned from BP. Just be careful out there and listen to your gut.
Ok, So then, how does someone like me that is helping a lender pool of private investors, from our real estate investor association, that has been newly formed get leads. We don't have a website or a common phone number, fax, email... there are 4 of us, using our own phones, emails, equipment, to help get the word out?
Here is a very simple answer to the question, and its worked 10/10 times for me.
Ask for a Statement of Financial Position and/or a Proof of Funds.
If it takes them longer than 12 hours to get you that, they're fake.
A proof of funds should be immediately available to every major institution, as well as most real brokers.
A statement of financial position is a required document for most banking institutions.
It's unfortunate that some had to go through this, but great read for newbies! Thanks a lot for sharing.
I posted a request for funding in BP market place the next day I was contacted by 2 scammers. One lady not sure what her real name is but she is operating under the business name Axiom Capital Group and not the one in Boston. They wanted $350 up front. The email she sent me she used the signature for someone who actually work at Axiom her name was Marlene in the body of the email but her email signature was Laverne Hypolite. Their website was just built in 2015. The application she wanted me to fill out for funding was a FHA loan application. The other person was from "Big Smiles" company a Steven Sill he was doing the whole rehab at 2% interest a month. The loan application was a joke and he had some other name in his email signature as well. Sad that people do this crap
Big scammers received e mails, checked out company, which does not exist. Axiom legiti in CA and only makes loans in CA and the one located in MA is legit
Already been scammed by another " private lender, don't want to have that happen again
Jnb finance llc, any information
My two cents. I have learned If they push you or make you feel urgent in any way = scam
2) there are good lending companies with long names. I have been contacted by a guy, who pretended to work for one of these "long name website" companies. He created email with the name of that company. I caught a strange misspell in the email. That was clear that he used similar name to look like he works for them.
Watch out.
I have had several "lenders contacting me on FB too.
I try to keep it low, meanwhile I report them. :)
Good thread!
private lender advertising on this site charged a processing fee, and then wanted money deposited as a security deposit. Sounds like a scam any advice
Additionally, in addition to references albeit simple and basic, I recommend to ALWAYS check the company you are looking to do business with out on www.bbb.org. I personally feel that any legitimate business should be an Accredited Business with the BBB.
Lastly, although simple, do a simple Google Search on the company name, company phone number, and company e-mail address of the company and individual you are considering doing business with. This will provide you a substantial amount of information about the company your considering working with (good, bad and indifferent).
Although this is an older post, there was an investigation by 20/20 in November 2010, on BBB that companies have to pay an annual fee of $425 to be accredited to get an A+, A, or A- ratings. Watch this video> BBB 20/20 Investigation
Wolfgang Puck, a renowned celebrity chef got an "F" because he chose not to pay and be accredited. May be he should consider changing his last name (JK).
@Anthony Woods Read this:
https://www.biggerpockets.com/forums/517/topics/252222-private-investor-looking-to-invest-in-your-business-or-projects?page=1#p1654996
I have been chasing money for many years now and it is almost universal that people who ask for money:
1. Up front
2. Outside of escrow
that does not involve paying for appraisals or other reasonable costs are scams. Legitimate funding sources can generally provide references too and can rattle off deals they have recently done.
If people pass those hurdles the is a high probability they are legit.
Thanks, good to know!
Jnb finance llc, any information
I was contacted by that guy at jnb ,and after all my paperwork done by email. He started texting me every conversation. Got weird after he wanted 2k,said i'd think about it. He got aggitated and finaly said'I BETTER think about it'.very threatening. A psych jobfor sure! Not sure this is too late for you.
Think about the information you are sending! In the lending industry we get everything necessary to be able to use your identity and do anything with it! This isn't a problem with a honest lender/broker but it sure is if you hand over your information or your client's information to someone that isn't truly who they say they are! Recently I asked about a loan program that a "direct lender" had and when the response that came back was quite a bit out of the ordinary I decided to do a little research. When the phone number didn't work and the website didn't work I knew not to move forward. Imagine how many times someone sends information without asking questions? Social Security Numbers, Employment, Date of Birth, Bank Account info, you name it.... take a few extra steps before you send anything that you wouldn't want a scam artist to have!
The short of it is this. If someone asks you for a LARGE deposit up-front then it is a scam. I offer private financing to lots of different clients and I work with many different investors. Some do not care at all and some do charge a minor fee up front. When I say minor I am talking about a $300 fee to pay for an appraisal or BPO.
There is always a cost of doing business in this world so you must understand that appraisals and BPOs may be needed to asses a property, and if you are the investor expecting to make $30,000+ then the $300 fee is a standard and usual cost.
If someone asks for a crazy amount, say like $1500 on a standard SFR deal then that is wrong and sounds fishy. If someone asks for $1500 on a commercial deal, well, that is pretty standard and usual.
Use common sense and revert to this thread and other threads for advice. That is my take on it.