Lender Scams and Warning Signs: Beware & Protect Yourself!

100 Replies

As a former Residential and Commercial Loan Officer I suggest going to www.Scotsmanguide.com and go to the lender search page. Choose either residential or commercial. There will be parameters that you can select in regards to the loan size, property type, location(state), etc. There will be a list of lenders displayed on the page and you can research these lenders. Check the BBB(not always reliable) and attorney general's office in that state. I strongly recommend using direct lenders only and stay away from brokers. Only utilize mortgage brokers that you personally know and trust, meaning you know they are reputable; they have actually closed deals in the past. Also be very careful if you are looking for commercial loans. I cannot stress this enough. Residential lenders are bound by lending laws such as RESPA, Truth-In-Lending and others that require the borrower to receive the loan terms in writing including an estimate of all fees charged. There are no requirements like these in commercial lending so loan terms and fees will vary in commercial. Lastly, never, ever give upfront money for a loan application unless you don't mind kissing that money goodbye. Also when applying for a loan, it's recommended that you apply with 3 different lenders and then you will be able to select the lender with the best terms. 

I remember years ago probably 9 years. I was introduced to a so call angel investor from a forum. Long story short he wanted up front fees. He sent me a statement along with his company logo address and etc.. Company did not exist, address was in rural area.. pure scam.. 

Also maybe 4 years ago I came across this private seller on Craigslist and he introduced me to a private lender and that lender had fake credentials as well.. wanted a deposit for lawyer fees, appraisal etc.. and wired to a personal account.. so sketchy.. I think the private seller was in on it too.. 

The worst is those text messages saying your paypal account needs updating and you log in to a fake interface with a scamsters finding out your log in details.. My friend almost got scammed but caught the scammer in the act..

@Hai Loc   for those reasons I will never have a pay pal account or EVER use a debit card.

I could go thru all of these posts, but won't.  

A loan is pretty much simple. 

Funding is more definitive. 

If a lender can't fund your request. Walk. 

Whoever the money is going to go to, are probably more diligent than you are, today. 

Thanks for the mention @Sylvia!

After a email or two, before you give out too much info...Call them. You'd be surprised how many Lenders (according to their facebook page) are born & raised in American States but have thick South African, South American & foreign accents!!

Thanks @Joshua Dorkin for this post, even though it's six years old. Lenders scams never grow old. It is prevalent six years ago and it is now. It's out there and I am experiencing it myself.

As our late president, Ronald Reagan said, "trust but verify". It's easy to trust someone but one needs to verify and ask, "show me the books, the portfolio and references" when someone simply verbally blurted out in his podcast that he did 300 deals in the past. I fail to do this. I simply trusted him, just because, he is a smooth "talker" and used to be a well known person in the BP community, but now as far as being a real estate investor is concern, he is out of the picture, according to a hard money lender. 

I have had fraudulent lenders and scammers promise me in writing to lend me $20,000. They had said there were no fees. Then there was a fee. I never gave them any money. People lie. Steal. Cheat. Frickin mamamalia. Lol

Sorry, it was $20,000,000.00

Looking for BP member suggestions for lenders that can use income reported on Canadian Tax Returns to qualify for a HELOC on a US Property.

I have found all the lenders to be scams. It seems that it is quite impossible for me to get a large loan. They All want my money. They are the lenders, they should provide the money. But NO it’s my fault! Lol

had a lady want to sell me a house on a quit claim deed! For dirt cheap on a house flip! But if I asked for a warranty deed the house price sky rocketed! My spider sense set bells off! Lol

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I have found absolutely no lenders who are legitimate who will fund me. There’s no recourse against these fraudulent lenders I guess since no law enforcement agency will investigate them and they fly under the radar as they steal money, cause companies to lose clients, accounts, and believability. Thanks for your post.

@Bill Gulley  

"Loan scams are usually found by big name lenders who provide loans on line. Quicken Loans runs a shady 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!"

Why do you say that Quicken Loans runs a shady practice? They are partnered/incorporated into (I don't quite understand the relationship) with Rocket Mortgage now. They advertise heavily in tv that they will approve your loan in sthg like 15 minutes, without any paperwork (as it's all done online), and they make it sound like a super easy quick way to get a mortgage, but in the end, they are really asking for all the standard documentation, just that you give them permission to access your bank accounts online instead of sending paper copies, and you send tax returns, W-2s, etc. via electronic means. 

They told me that they are the largest producer of mortgages in the USA, and that they don't sell to FNMA, they service the loans themselves. For one thing, why should I even care who acquires the loan, what difference does it make, and for another thing, why should I believe that? When I hear one thing that sounds untrue, I tend to mistrust anything else they have to say. 

Their interest rate is not the lowest advertised either, and he had a line for that, saying that other lenders quoted online are lying. 

They have a site that I should look for houses on, but it had far different offerings than Zillow or other RE sites, weird. They wanted to hook me up with an agent also, which I didn't need. 

He was a great conversationalist, I will say. 

As for BBB, I learned years ago not to trust their ratings in any way, shape, or form. They are paid for by the company themselves, the same as with the good old Good Housekeeping Seal of Approval (does it still exist? ha!). It's good to read all the consumer complaints on the company, however, and be forewarned. But with all that, they will still have a A+ rating, as all the complaints have been "resolved". What a lot of hooey. 

I'm getting so jittery after reading all these scams that I'm thinking of just paying for the properties all cash and refinancing later through my major bank. 

I recently became a lending “broker”representing multiple lenders including traditional, alternative and private lenders. I became interested in the lending side of the Industry after being involved as an investor and utilizing all three capital providers and getting an upfront closeup view of the lending world. 

I have been a member on BP since 2014 and admittedly have not been an active poster, I guess you can say I was more of an active stalker, just following everyone’s post etc... and generally enjoying the forums, post and accessing the tools available for PRO members ( you should all try to become PRO members when you can) the tools are worth the cost of membership.

I too have been weary of lender scams and schemes and thoroughly vet every one I have spoken to and met (you should too). 

I reviewed many companies to independently represent prior to making a commitment to my current company and wanted to align myself with professionals who have been in the trenches and are here for the long haul. We are as transparent as we possibly can be and will let you know if we can get you funded with 2-24 hrs of receiving your information. 

Upfront fees other than appraisals and title insurance (which are3rd party) should always be a red flag to potential borrowers and you should start looking elsewhere when a broker or lender starts off with them. Some lenders may have minimal upfront fees to do credit and background checks, legal and other out of pocket expenses once the borrower excepts the lenders term sheet but for the majority of the lenders we represent their fees as well as our fee come out at closing, meaning we got you funded and it’s a good day with money flowing back and forth and high fives all around.

So do your lender/broker due diligence just like a property inspector does what he/she does... thoroughly.

If you have any questions about finance products, just ask and I will do my best to answer them for you And it won’t cost you a dime.

Kevin 

Hello, I’m a new Real Estate Investor requesting advise...

I have a company which I’m really interested in doing business with “LENDER”. They offer a “Portfolio of 3, 4, 5.. turn key ready investment properties” of course with the upfront 20% down. But hearing about “scams out there” is scary to trust this legit deal.

Please advise on steps to take..thanks

Sincerely,

Olivia

MIKASA PROPERTIES LLC

The biggy is asking for a processing fee or a good faith fee from $10-$40K depending on the deal size up front before funding. 

Why do business in your personal name anyway. Work as a LLC or corporation. Don't risk your personal credit standing for business purposes. Business lines of credit, which allow borrowing from your company is the best way to avoid lender scams.

@Manon I like your post and you are correct in most of your assessement of Quicken Loans.   As an industry insider we have all known for years they are one of those companies that is all about advirtising.  They can mask thier poor prodcut with massive volume of loans to uneducated borrowers.  They lied to you when they said they don't sell to Fannie.  The bottom line is all lenders sell to either Fannie Mae or Freddie Mac, even if they retain servicing.  No lender has the kind of money it takes to fund all those loans.  That includes all the big banks.  Even Fannie & Freddie fund their loans through selling bonds, but neither Fannie nor Freddie service their own loans, lenders do that.

Originally posted by @Manon Sheiman :

@Bill Gulley  

"Loan scams are usually found by big name lenders who provide loans on line. Quicken Loans runs a shady 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!"

Why do you say that Quicken Loans runs a shady practice? They are partnered/incorporated into (I don't quite understand the relationship) with Rocket Mortgage now. They advertise heavily in tv that they will approve your loan in sthg like 15 minutes, without any paperwork (as it's all done online), and they make it sound like a super easy quick way to get a mortgage, but in the end, they are really asking for all the standard documentation, just that you give them permission to access your bank accounts online instead of sending paper copies, and you send tax returns, W-2s, etc. via electronic means. 

They told me that they are the largest producer of mortgages in the USA, and that they don't sell to FNMA, they service the loans themselves. For one thing, why should I even care who acquires the loan, what difference does it make, and for another thing, why should I believe that? When I hear one thing that sounds untrue, I tend to mistrust anything else they have to say. 

Their interest rate is not the lowest advertised either, and he had a line for that, saying that other lenders quoted online are lying. 

They have a site that I should look for houses on, but it had far different offerings than Zillow or other RE sites, weird. They wanted to hook me up with an agent also, which I didn't need. 

He was a great conversationalist, I will say. 

As for BBB, I learned years ago not to trust their ratings in any way, shape, or form. They are paid for by the company themselves, the same as with the good old Good Housekeeping Seal of Approval (does it still exist? ha!). It's good to read all the consumer complaints on the company, however, and be forewarned. But with all that, they will still have a A+ rating, as all the complaints have been "resolved". What a lot of hooey. 

I'm getting so jittery after reading all these scams that I'm thinking of just paying for the properties all cash and refinancing later through my major bank. 

I agree with Tim and Manon.  But, I would avoid naming any lender by name as having got me into their scam.  As one poster indicated, "Trust only yourself".  I know investors who use only lines of credit from major Banks in real estate deals and only Flip.  Smart investors avoid scams by never making transactions in their personal names anyway but, only through their business entity.  To make this story short, the investors I know lend to themselves only and pay themselves back at the closing of each deal.

This is an awesome thread and it's stressful to start reading hoping that the company you are with doesn't have bad boy tendencies and I'm happy to report, we don't show any signs of scamming, LOL!

No Junk Fees, The only pre-payment is appraisal after the loan is approved. Loan approved in 24-48 hours and a good history of closing deals. 

I know it's an old thread, but it's full of the right type of information to help you get real financing and not have the wool pulled over your eyes.

Yes I have one. COGO I paid a non refundable fee of $197.00 Only to find out bad the deal was. Not including the $197.00 It was over $8,000 just to get the loan. I was not happy with the deal. So now I have an offer on a property that I don't have the cash to close on if they except my offer. I need an investor who would like to here about the deal and work out a deal with me.

@Joshua Dorkin Thanks for the post. At the REIA I head up in Brighton Michigan I was asked how to know if a private money lender is the real deal. I will be referring my members to this post! There is so much experience in this thread.

I have been fortunate enough to not have any problems with my private money lenders.

How is that?

Trust and brutal transparency.

Transparency is another way of saying, be honest. A few of my investments didn’t go as planned. I was brutally honest with my lender and he was thankful to be informed.

**How he replied to me was just as important as me being honest with him. He wasn’t angry, he wasn’t fearful, and most importantly he didn’t put me down. He offered to help figure out a way to better the situation. FYI, this private money lenders is out of state. Nevertheless, I did meet with him a few times and spent a fair amount of time getting to know him before borrowing his money.

For me, there is no secret sauce because my experience has been based on trust and brutal transparency even when there is bad news to share. .

Thanks again for

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