Dear Reader,

In this blog I would like to talk about a form of fraud known as Bait & Switch.  I will share my own mortgage related definition of bait & switch, the dictionary's definition of bait & switch and use an example which I faced late last week.

Dictionary Definition: Bait and Switch

Wikipedia: The Free Encyclopedia

A bait and switch is a form of fraud in which the fraudster lures in customers by advertising a product or service at an unprofitably low price, then reveals to potential customers that the advertised good is not available but that a substitute good is. The goal of the bait-and-switch is to convince some buyers to purchase the substitute good as a means of avoiding disappointment over not getting the bait, or as a way to recover sunk costs expended to try to obtain the bait. It suggests that the seller will not show the original product or product advertised but instead will demonstrate a more expensive product. http://en.wikipedia.org/wiki/Bait_and_switch

 Nima's Definition: Bait and Switch

A bait and switch is when a mortgage professional tells you and promises you an incredibly low interest rate but once the mortgage process is almost over they change the interest rate or charge you more for what they promised you in the beginning.

Overview:

A bait and switchis seen widely in the mortgage business.  This is a way of obtaining a new client/lead by telling them that you are the best and you have the best.  What do most mortgage shoppers look for?  The best interest rate and the best product that fits into their current and short term future financial situation.  A mortgage professional (mortgage broker or loan officer) can tell you that they have a 30 year fixed rate mortgage at 6.5% with 0 points but it doesn't catch your interest and you want to keep calling around for more options to choose from.  A smart mortgage shopper will call atleast 3 lenders and inquire about their current interest rates.  A smart shopper should also remember that a 1003 residential home loan application is required for a mortgage professional to give you a worthy quote.  So if you call 3 lenders and their 30 year fixed rate mortgage is 6.5% with 0 points for 2 of the lenders but one has an interest rate of 5.875% with 0 points then red flags should go up in your mind.  How can the rates be totally off?  This should be a reason for you to become cautious and do some research on the lender and even the mortgage professional.  Lenders are not always the same but they could be 0.125 or 0.25 or 0.375 different but not 0.5 to 0.625. 

 How to avoid a possible bait and switch lender?

Open up your local newspaper and see if there are any lenders in the Real Estate section that seem like honest neighborhood lenders who you could trust.  Go to your towns or a nearby towns Chamber of Commerce and find a lender or two and request quotes or even just ask the Chamber to recommend you to a lender.  Talk with your family members or best friends or your real estate professional and ask for a referral.  Not all mortgage professionals are bait and switch artists so you should do your homework and be careful when choosing who you should work with.  I can say that you should always contact me for your real estate financial services but that wouldn't be fair to other lenders locally and nationally.  Yes, I always strive to be the best but you wouldn't be able to trust me until the transaction is funded and closed with a real estate attorney or a title company depending on where you are located.

Quick Example:

Last week I got a call from one of my mortgage professionals that I used to work with at Washington Mutual Bank.  He is a mortgage broker and he had given his client to a mortgage broker who had given his loan to Countrywide wholesale.  They were offered a 5.875% jumbo 30 year fixed rate mortgage.  He called me and asked me to tell him what our rates are and I told him about 6.375 or 6.5% with 0 points.  He asked if I was sure and I said absolutely.  I worked the loan scenario on my system and I confirmed the quote that I gave him.  He tells me that he does not trust the mortgage broker and he wants to give this loan to me.  You ask why would he do this?  Well, he is a wealthy individual and he does not care about referring one of his very own clients to me.  This is a great example of a bait and switch.  A very low interest rate was quoted to someone but at the very end when it comes to signing the paperwork, there will be more closing costs involved or a mystery reason will arise and make the interest rate increase. 

This example makes me look good now doesn't it?  A mortgage professional is willing to refer me his business because he trusts me and not just some mortgage broker that he has never done business with.  He is willing to take special care of his client and not be paid for giving them to me.  As you know, I can't do a loan for another mortgage professional and then pay them because that is illegal.  As most of you know, I do good business every single day of the week, 7 days a week. 

Hope you enjoyed reading this blog about bait and switch.  A very disgusting tactic that is used every single day across the country while most borrowers don't even know it is happening to them.  This blog was intended to make you more cautious as a consumer/borrower, become a smart mortgage shopper.  I always want the best for everyone so a small blog like this can maybe help you or someone you know out.

If you have any questions or want an honest professional worthy quote, contact me today.  I originate residential home loans in all states and I'm always read to help you.  I can best be reached through my website: http://www.mynima.com/ or you can call me directly at 203.913.6016  I have been a Fairfield County, CT resident for over 20 years.  I have offices in Stamford, CT and Norwalk, CT.

For more information or if you have any questions/concerns, click here to ask me: Contact Nima now!

For a complimentary FREE Mortgage Pre-Approval, click here: FREE Home Mortgage Pre-Approval 

First Time Home Buyer Guide: First Time Homebuyers Guide

Your Neighbor & Connecticut Mortgage Professional,

Nima Rezvan

203.913.6016

http://www.mynima.com/

*Note: I can originate loans in all 50 States!  Making homeownership dreams come true since 2003!  Working Nights & Weekends until 10:00pm for your convenience.

Member of the Fairfield, Connecticut Chamber of Commerce:

http://www.fairfieldctchamber.com/online/directory/display.asp?business=Countrywide+Home+Loans

Member of the Stamford, Connecticut Chamber of Commerce:

http://www.stamfordchamber.com/membinfo.asp?id=5996

Member of the Norwalk, Connecticut Chamber of Commerce:

http://www.norwalkchamberofcommerce.com/